http://hat4uk.wordpress.com/2013/08/11/global-looting-the-new-eu-bailin-law-was-hurried-through-alright-but-the-template-was-premeditated/
Deutsche Bank…..two left feet
http://www.zerohedge.com/news/2013-08-11/internal-bundesbank-report-predicts-new-greek-bailout-early-2014-more-headaches-merk
Submitted by Tyler Durden on 08/11/2013 17:07 -0400
Eurozone funding shortfall - now 4 trillion !
Submitted by Tyler Durden on 08/11/2013 10:59 -0400
Greece news - let the next greece bailout begin - present timetable for reality to bite , around November...
GLOBAL LOOTING: The new EU bailin law was hurried through alright…but the template was premeditated
How imminent bank collapse fears forced the Eunatics to act
Deutsche Bank…..two left feet
It’s becoming clearer with each day that passes why the EC rushed its new bailin law through the European Parliament at the beginning of this month. When the US returns from vacations after September 2nd – and even more so once the German elections take place on September 22nd – we can expect to see the brakes come off eurobank insolvency. But this is a race against time: Angela Merkel’s fate hangs in the balance, and there are clear signs that the bomb might go off prematurely.
Almost exactly a year before the Cyprus bailout, EU Directive 2012/0150 COD was drafted with a view to creating a template for future banking collapses. Its proposals mirror pretty exactly what happened in Cyprus – viz, a prototype bailin. Written in June 2012, it points clearly to the conclusion that Cyprus was a premeditated crime on the part of Brussels-am-Berlin.
The most obvious reference in the document is this one (my emphasis):
‘In any case, if the institution under resolution fails and does not have sufficient funds to repay depositors, the universality of proceedings ensure the equal treatment of creditors irrespective of their nationality, place of residence or domicile…..In order to ensure the equal treatment of creditors, [EU] Company Law Directives contain rules for the protection of shareholders and creditors. Some of these rules may hinder rapid action by resolution authorities.‘
Brussels sources say those safeguards have been quietly, but totally, dumped. The new Law – part of a batch relating to the Monetary Union road map – is, if you like, a post-rationalisation of what happened in Cyprus. But it is also a preparation for what the Eunatics know is coming down the line. What started off as a premeditated plan has suddenly become a matter of urgency. Here’s why.
My Madrid source has been saying for several months now that the Spanish banking system is being quietly propped up by the usual Peter-pays-Paul bollocks Draghi comes up with. Global Economic Analysis blogger Mish sums up the reality thus:
‘Spain’s exposure to Portuguese sovereign debt and unrealized losses on real estate loans are two reasons a collapse is inevitable….Spanish bank exposure to Portugal today is higher than French bank exposure to Greece in early 2010….A restructuring of Portuguese sovereign debt similar to the one completed by Greece, which involved haircuts of over 50%, would wreak havoc on Spain’s banking system.’
Well beyond Spain, Europe’s biggest banks – which have more than doubled their highest-quality capital to meet tougher rules – still have a long way to go in order to satisfy EC/ECB regulators…hence all the scurrying about with rights issues of late. But ringing and Skyping around the Continent last Friday, three large banks were on most people’s lists….and seven were mentioned in all.
Perhaps one of the more surprising of these is Barclays (not domiciled in the eurozone, but huge across the EU) in that many observers see the banks’ rights issue as likely to be a flop. This is accurately reflected by the fact that its shares closed nearly 6% lower after the bank said last month that it would issue £5.8bn in shares to meet new EU requirements. More disturbing are the recurrent rumours about “cans full of worms” in the bank, although there is nothing specific to go on.
The most worrying potential casualty – certainly for the inhabitants of the Chancellery – remains Deutsche Bank. The main contention is that the bank has taken a colossal hit on currency swaps. Last month Max Keiser described the bank as ‘on suicide watch’, and in June FDIC vice chairman Thomas Hoenig called Deutsche “horribly undercapitalised”. German Sloggers continue to insist that DB is being secretly propped up with government money. There are of course elements in Frankfurt who would love to see more solid bad news from Deutsche to put the CDU completely on the spot; but they remain careful about what they wish for.
The third most commonly mentioned bank in the ‘troubled’ category is SocGen. Look at the numbers on French banking exposure to Greece, and you will see how massively the French dumped their toxic waste onto the ECB after 2010. In some ways, that’s bad for Greece (dumping Athens wouldn’t collapse the French system today) but like every country in the West, there’s lots of sub-sub-glub-glub underwater subprime in there.
In Italy, multiply bailed-out Banca Monte dei Paschi di Siena SpA is not widely expected to make it to the finishing line. Italy’s central bank continues its own Peter-pays-Paul version of the endless circulating money game with MdP, but that show is now so obvious to everyone, it’s hard to see how it can stay on the road, let alone finish up anywhere safe. Standard & Poor’s cut the ratings of 18 Italian banks during the last week of July saying the “recession will be longer than expected”. I must confess I don’t know of anyone who expected it to be short, but there you go.
However, the Slog favourite for Collapse of the Century so far remains Royal Bank of Scotland. I said last week that all this bollocks about the taxpayers getting their money back was, er, bollocks, and this morning Vince Cable as good as admitted that, by saying RBS “will be in public hands for another five years”. It’s actually going to be a large piece of Stonehenge on our backs, but let’s not split hairs. It is a gigantic collapse waiting to happen, and in my view it is inevitable. I really do not see how breaking it up is going to help.
Last but not least, The Cooperative Bank is technically insolvent already. As I explained recently, it is the Bailin Which Dare not Speak it’s Name down Westminster way, so dearly would all Parties in da House like this turd to be flushed away. But it refuses so to do….and the longer they dither, the worse it’s going to get. Basically, what’s happening here is that ‘bondholders’ (who are really old and poor folks converted from depositors some time ago) are going to be treated the same as any trick-or-treat Hedge Fund, in order to bail out the larger account customers….who just happen to include the LibDems, the Labour Party, and the TUC. The Co-op and the Unions in turn bankroll a great many Labour MPs – including Ted Testicles himself, a bloke who isn’t going to emerge from this scandal with a nice smell attached to his body.
In short, thinking that the bailin template is a hastily flung together and somewhat academic exercise is fine if you want to lose the shirt off your back. Otherwise, withdraw such money as you can, and buy any asset that you can. It doesn’t matter if its canned food, gold or a motor bike: just do it – and get a move on.
In the meantime…..
http://www.zerohedge.com/news/2013-08-11/internal-bundesbank-report-predicts-new-greek-bailout-early-2014-more-headaches-merk
Internal Bundesbank Report Predicts New Greek Bailout In Early 2014, More Headaches For Merkel
An internal Bundesbank document discovered by Der Spiegel states, in opposition to the comments by Germany's electioneering Chancellor Merkel, that Europe "will certainly agree to a new aid program for Greece" by early 2014 at the latest. As Reuters reports, Frau Merkel has repeatedly played down suggestions Greece will require more aid (or debt relief) in light of German voters major skepticism over moar of their money being flushed into the Mediterranean. The document notes that the risks of the current aid package for Greece are "extremely high" and that recent approval of the tranche payments were politically motivated - directly contradicting Merkel's 'praise' for Greek efforts as the report concludes Athens' performance as "hardly satisfactory." Opposition parties suggest Merkel is throwing "sand in the eyes" of the electorate as the Bundesbank warns "there is no private buffer left that could protect the European taxpayer."
German opposition parties accused Chancellor Angela Merkel on Sunday of lying before elections next month about the risks of a new bailout for Greece, after a magazine reported the Bundesbank expects it will need more European aid in early 2014.Der Spiegel quoted an internal document prepared by the German central bank as saying that Europe "will certainly agree a new aid program for Greece" by early next year at the latest.The Bundesbank, which declined comment, also described the risks associated with the existing aid package for Greece as "extremely high", according to the report, and said the approval last month of a 5.8 billion euro ($7.7 billion) aid installment to Athens had been"politically motivated"....Aware that German voters are skeptical about more bailouts, she has repeatedly played down suggestions Greece may require extra aid, or debt relief, despite conflicting views from experts, including at the International Monetary Fund (IMF)...."There will be a rude awakening after the election," [Opposition spokespersons] said in a statement. "By disputing the need for additional aid for Greece, the Chancellor is lying to people before the election."The finance ministry declined comment on the report....Bernd Lucke, the head of a new anti-euro party called the "Alternative for Germany", accused Merkel's center-right government of "throwing sand in the eyes" of voters by refusing to admit the truth about Greece before the September 22 election...."There is no private 'buffer' left at this point that could protect the European taxpayer from the consequences of a deterioration of the crisis," the paper says.In recent months European leaders, including Merkel, have praised the work of the Greek government in delivering on the reforms that are a condition of its bailout. But the Bundesbank, according to Der Spiegel, described Athens' performance as "hardly satisfactory".
This should come as no surprise since we first discussed the inevitable fact that Greece would need another bailout back in January - and that Germany would be forced to foot the bill...
What everyone is forgetting is that the heart of the Greek problem is not the Greek sovereign debt, and certainly not the rate of interest, but the fact that Greece's financial system, i.e. its banks, are utterly insolvent: and with the private banking system no longer creating money by handing out loans to a just as insolvent broader population (and the ECB certainly no longer injecting direct liquidity into the Greek economy) there is little that supports any form of economic growth (the Austrians out there will immediately recognize the problem: if money is not being created, the economy is not "growing", period). After all there is a reason why of the countless billions in Greek bailouts, of which the majority was used primarily to fund interest and maturity payments to other banks such as Deutsche Bank, the biggest portion that remained on the ground in Greece never made it to the actual people, but served to prop up the Greek banks, some €50 billion.What was this money used for ? Simply said, to plug capitalization shortfalls arising from one of two things: i) a gigantic outflow of deposits from the local banking system, as Greek lost all confidence their money was safe in the local banks, which meant Greek banks had to promptly find the money to pay their depositors lest a countrywide bank run developed which would then result in a Europe-wide financial panic, and ii) the soaring notional amount of non-performing "bad" loans, which remained as placeholders on the bank balance sheets, market at whatever mythical number the local accounts let the banks mark them at, but which generated zero inbound cash flows. Which, incidentally, would mean that deposits were under-collaterialized, and the realization that NPL levels are stratospheric and going higher, would lead to i) and the appropriate dire consequences.Which brings us to the topic of today's post.Moments ago Kathimerini reported that in 2012, the amount of non-performing loans has exploded by a laughable amount, rising some 50% from December 2011, when it was "only" 16% and stood at a gargantuan 24% last month (indicatively, in the US this would mean that some $1.7 trillion in loans was nonperforming). And therein lies the rub, because as Kathiermini prudently notes, the "bad loans come to a considerable 55 billion euros. This means that the sum of NPLs already exceeds the total funds set aside for the recapitalization of the local credit system, which amounts to €50 billion."Oops.This means that not only every single euro allotted for the bailout of the Greek banking sector has been used up to plug a gaping NPL shortfall, but already Greece is €5 billion short.
But in the meantime - just keep buying those 9.6% yielding GGBs...
And we suspect, given this news and the 'template' provided by Cyprus, that the modest trend in the chart below will be rapidly reverted lower...
What could go wrong?
Eurozone funding shortfall - now 4 trillion !
Eurozone Funding Shortfall Rises To Over $4 Trillion, Increases By More Than $500 Billion In A Year
- Barclays
- Central Banks
- Deutsche Bank
- ETC
- European Central Bank
- Eurozone
- fixed
- Gross Domestic Product
- RBS
- Royal Bank of Scotland
Back in April 2012, Zero Hedge pointed out something rather disturbing for the European banking sector and defenders of the European monetary myth: the "aggregate shortfall of required stable funding Is €2.78 trillion" which was the number estimated by the BIS' Basel III rules needed to return to some semblance of balance sheet stability in Europe. More importantly, this was a number so big, it was obvious that there was only one way to deal with it: cover it up deeply under the rug and pray it never reemerged.
What happened next was inevitable: Basel III's implementation was delayed as there was no way Europe's banks could satisfy their deleveraging requirements, while the actual capital shortfall hole became bigger and bigger. Today, 16 months later, the FT discovers what Zero Hedge readers knew long ago in "Eurozone banks need to shed €3.2tn in assets to meet Basel III." In other words, not only has Europenot fixed anything in the past year, but the liquidity tsunami injected by the central banks merely taped over the epic capital shortfall that just got epic-er, increasing from €2.8 trillion to €3.2 trillion, an increase of over half a billion to over $4 trillion in one short year.
Sadly, just like back in April 2012, so now, Europe has no hope of actually addressing this much needed deleveraging and so the can kicking will continue until the number rises to $5 trillion, $6, $7 etc until one day the market's "head in the sand" strategy finally fails and every emperor around the world is found to be naked.
Europe’s biggest banks will have to cut €661bn of assets and generate €47bn of fresh capital over the next five years to comply with forthcoming regulations aimed at reducing the likelihood of another taxpayer funded bailout.The figures form part of an analysis by the UK’s Royal Bank of Scotland – which singles out Deutsche Bank, Crédit Agricole and Barclays as the banks most in need of fresh capital – highlighting that five years on since the financial crisis, Europe’s banks are still “too big to fail”.Overall, the region’s banks need to shed €3.2tn in assets by 2018 to comply with Basel III regulations on capital and leverage, according to RBS.The burden is greatest on smaller banks, which need to shed €2.6tn from their balance sheets, raising fears that lending to the region’s small and medium size enterprises will be sharply reduced as a result.“There is too much debt still across Europe’s economies and the manifestation of that is on bank balance sheets,” said James Chappell, an analyst at Berenberg bank. “The major issue is that the banks still don’t have enough capital to write down those loans.”Eurozone banks have already shrunk their balance sheets by €2.9tn since May 2012 – by renewing fewer loans, repurchase and derivatives contracts and selling non-core businesses – according to data from the Frankfurt-based European Central Bank.Deutsche Bank recently said it would seek to cut its assets by about a fifth over the next two and a half years. Barclays, which announced a £5.8bn rights issue last month, said it wants to shrink its balance sheet by £65bn-£80bn.Europe’s banking sector assets are worth €32tn, or more than three times the single currency zone’s annual gross domestic product.
Of course, if Europe's banking sector actuallydoes take its deleveraging obligations seriously, what will happen to Europe's economy, where private sector loan creation is already at a record low level, will be nothing short of a stunning contraction, unlike anything seen in the past 5 years. And yet, that is precisely the path Europe most take in order to emerge on the other side with a healthy beating financial heart. That it won't is a given because doing the right thing would mean a complete wipe out for the banker oligarchy. And, as always, it will be the common man who will suffer when the forced deleveraging day finally comes.
Greece news - let the next greece bailout begin - present timetable for reality to bite , around November...
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