http://www.zerohedge.com/news/europe-its-all-about-bank-run
Submitted by Tyler Durden on 05/24/2012 13:46 -0400
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_30169_24/05/2012_443772
In Europe, It's All About The Bank (Run)
The word 'encumbrance' has received a lot of headlines in the last few months - and rightfully so - after we pointed out the impact that LTROs had in subordinating senior creditors of European banks. As Morgan Stanley points out, this is a considerable problem for bondholders as 'in a wind-down scenario, senior unsecured holders have recourse to fewer assets and hence face a higher loss given default (LGD)'. In understanding just how bad things are for European banks, it is important to focus on 'how much loss-absorbing capital there is beneath you in the bank’s liability stack, as this is the capital that will take losses before senior creditors in the event of a bail-in' which means looking at Deposits as well as encumbrance.
Last night we showed the Loan-to-Deposit ratios for various banks across Europe and Morgan Stanley takes up the offensive noting that the encumbrance effect from depositor preference changes (i.e. withdrawal) is the real threat. While the relative size of the deposit bases of the dozen or so banks that are analyzed below is stunning (with MS estimating best-case recovery in a bank default at around 80% and worst-case a total loss - implying of course that equity is entirely worthless - which we largely knew) and what is very apparent from the pictorial representations of banks’ liability structures is that rather than encumbrance from covered bonds/LTRO etc. the bigger issue for encumbrance of senior unsecured investors is the potential threat from depositor 'runs'.
The key is that all the hope of another LTRO is limited by collateral as policy-makers are well aware that, in a world where failing banks are to be resolved through resolution frameworks and senior creditors are to take losses to shield taxpayers’ funds, banks may not have enough ‘bail-in-able’ debt, given their growing reliance on secured funding sources.
With deposits increasingly impaired - and/or the potential for contagious bank runs if we see Grexit, Europe's problem is 'all about the bank runs' now and we were told yesterday how far off that is.
We would suspect though that was Greece to leave then the move to a Euro-wide deposit scheme - and its implicit exchange of sovereignty for monetary support - would evolve quicker; but the crisis has to come first for European leaders to do anything other than talk.
or as Jefferies' David Zervos recently noted:
and....."Once mom and pop in the rest of EMU see the Greek banks shuttered, there will be a southern European run. The imbalances in Target2 will shift massively against Germany and their only chance will be to cave in and accept mutual liability bond issuance and deposit insurance.Basically, we are on the fast track to a Europe with a pan mutual socialized downside, backed by the Germans and ultimately the ECB. It will be a bumpy ride, and we will lose the Greeks and maybe some others along the way. But a smaller, more sound, more stable, more fiscally profligate and more socialist Europe is coming quickly to the global capital markets. And its about freakin' time!"Deposits and Encumbered/Secured Assets...
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_30169_24/05/2012_443772
State to get hands on HFSF funds
Accounting Office report warns revenues may miss target by 1.35 billion euros 
The Finance Ministry is considering using the funds that the Hellenic Financial Stability Facility (HFSF) has at its disposal to secure some desperately needed cash for the state for as long as possible.
The HFSF possesses some 3 billion euros intended for the recapitalization of the country’s credit system, but the state has the authority to use it to cover its own obligations, especially for July when it is likely to fall into the red.
The ministry is examining various plans regarding how to increase the state’s liquidity as it is now understood that the next tranche from the bailout mechanism cannot be expected before the end of July.
This was the subject of a meeting led by Finance Minister Giorgos Zannias on Thursday at the State General Accounting Office, which heard that given the delay in the collection of tax revenues and the possible extension to the deadline for the submission of tax statements by at least 15 days, the use of the HFSF funds appears imperative from as early as late June.
A report by the State General Accounting Office in fact suggests that the budget revenues target this year will have to be revised, as there is a forecast for a lag of 1.35 billion euros. This is mainly attributed to income tax revenues (seen missing their target by 330 million euros) due to cuts in salaries and pensions, direct taxes from previous years (275 million), transaction taxes (209 million), special consumption taxes (110 million), and the postponement of the early renewal of the Athens International Airport concession contract (230 million).
May has been a particularly bad month as far as state revenues are concerned, as in the first 20 days of the month that included a general election the inflow to public coffers was 20 percent lower than in the same month last year.
The ministry is pinning its hopes on the payment of corporate tax in the last 10 days of this month and the Special Property Tax of 2009 due by June 30.
and....
Greek Schizophrenia Update
The latest from the mathematically challenged country:
Yet at the same time...
That's right - 30%, or a polling recordhigh, support anti-bailout Syriza. Finally, something like 120% want to shove Merkel's memorandum in her face, or any other orifice, although that number is based on our own, highly unscientific estimates. Basically, the Greeks don't care what currency their debt is denominated in, as long as it is not paid...
The only number we are missing is what is the real amount of deposits left in Greek banks as of this posting.
|
No comments:
Post a Comment