G-20 Revolt? France Gets "Positive Reception" To Challenge US Bank Fines
Submitted by Tyler Durden on 08/03/2014 15:46 -0400
In recent weeks France has defied US demands not to build Mistrals for Russia, has questioned dollar imperialism and the Petrodollar, and has blasted the US banking regulator's fines as "accelerating the decline of the dollar." So it is likely not a huge surprise that ahead of the G-20 meeting of world leaders later in the year, The FT reports, France has gathered support to challenge US regulators imposing heavy penalties on foreign banks. Berlin, London and Rome have backed Paris in its push to have its concerns about so-called US extraterritoriality discussed when leaders of the world’s top 20 economies meet hoping to bring "more proportionality" to bank fines. With allies like this...
As The FT reports, top regulators have been raising concerns about the impact of the long procession of fines on their efforts to strengthen banks’ finances.
France has gathered support to challenge US regulators imposing heavy penalties on foreign banks at a G20 meeting of world leaders later this year after the record $8.9bn fine levied on BNP Paribas last month.Berlin, London and Rome have backed Paris in its push to have its concerns about so-called US extraterritoriality discussed when leaders of the world’s top 20 economies meet in Brisbane in Australia in November, according to French and other European officials....“There should be co-ordination between regulators, as there should not be multiple jeopardy,” agreed one senior European official, who confirmed that there had been “informal discussions” about putting the issue of bank fines on the G20 agenda.“It is an issue, but we have to be careful not to go into an area of saying ‘it is too much and we have got to lay off these guys’,” said the official, who added that the G20 could discuss how to bring more “proportionality” to bank fines.French finance minister Michel Sapin sought support for France’s stance in recent meetings with Wolfgang Schäuble and Pier Carlo Padoan, his German and Italian counterparts, according to French officials. There was a “positive reception”, one said....In Berlin, officials said Germany had agreed to back Paris, saying it supported a common EU approach to the US over extraterritorial jurisdiction. Berlin sees that a union-wide approach to Washington is more likely to bear fruit than case-by-case discussions.
As a gentle reminder, Brazil, Russia, India, China, and South Africa are all members of the G-20 and, we suspect, would not be too worried backing any such coordinated actions against US extraterritoriality.
However, we leave it to the French to express their anti-dollar-imperialism...
- NOYER: BNP CASE WILL ENCOURAGE ‘DIVERSIFICATION’ FROM DOLLAR
Here is the full google translated segment:
Q. Doesn't the role of the dollar as an international currency create systemic risk?Noyer: Beyond [the BNP] case, increased legal risks from the application of U.S. rules to all dollar transactions around the world will encourage a diversification from the dollar. BNP Paribas was the occasion for many observers to remember that there has been a number of sanctions and that there would certainly be others in the future. A movement to diversify the currencies used in international trade is inevitable. Trade between Europe and China does not need to use the dollar and may be read and fully paid in euros or renminbi. Walking towards a multipolar world is the natural monetary policy, since there are several major economic and monetary powerful ensembles. China has decided to develop the renminbi as a settlement currency. The Bank of France was behind the popular ECB-PBOC swap and we have just concluded a memorandum on the creation of a system of offshore renminbi clearing in Paris. We have very strong cooperation with the PBOC in this field. But these changes take time. We must not forget that it took decades after the United States became the world's largest economy for the dollar to replace the British pound as the first international currency. But the phenomenon of U.S. rules expanding to all USD-denominated transactions around the world can have an accelerating effect.
In other words, the head of the French central bank, and ECB member, Christian Noyer, just issued a direct threat to the world's reserve currency (for now), the US Dollar.
- Total’s de Margerie Sees No Need for Dollars in Oil Purchases
Oil major Total's chief executive Christophe de Margerie was responding to questions about calls by French policymakers to find ways at EU level to bolster the use of the euro in international business following a record U.S. fine for BNP."There is no reason to pay for oil in dollars," he said.He said the fact that oil prices are quoted in dollars per barrel did not mean that payments actually had to be made in that currency.
So even a major beneficiary of the status quo appears to see the end in sight for the Petrodollar.
And now The Triple Whammy
- *FRANCE SAYS INCREASING EURO USE IS ISSUE OF 'GLOBAL BALANCE'
- *SAPIN SAYS EURO AREA NEEDS TO LEAD DISCUSSION ON DOLLAR USE
- *FRANCE NOT FIGHTING 'DOLLAR IMPERIALISM,' SAPIN SAYS (wo shy mention it?)
French Finance Minister Michel Sapin says that now is the right time to bolster the use of the euro in transactions outside the U.S. Sapin speaks in an interview with Bloomberg News in Aix-en-Provence, France.
“We sell ourselves aircraft in dollars. Is that really necessary? I don’t think so,” Sapin says, adding "I think a rebalancing is possible and necessary, not just regarding the euro but also for the big currencies of the emerging countries, which account for more and more of global trade."“We can avoid the exchange rate risk, and that’s always useful. We can diminish financing costs in pricing more in other currencies,” Sapin says.“This is not a fight against dollar imperialism,” Sapin says.“It’s up to Europe, to the euro zone in particular, to lead this argument,” Sapin says.As The FT reports, Mr Sapin said he would raise the need for a weightier alternative to the dollar with fellow eurozone finance ministers when they meet in Brussels on Monday, although he declined to go into detail about what practical steps might emerge.
Portugal's Insolvent Banco Espirito Santo To Be Bailed Out, Existing Equity To Be Wiped Out
Submitted by Tyler Durden on 08/03/2014 11:18 -0400
When a week ago, the third and final Banco Espirito Santo HoldCowent bankrupt...
... we knew it was only a matter of time. Sure enough, following Friday's record collapse in the stock price of Portugal's mega bank after even Goldman decided it had enough and pulled the plug on an equity investment it had made just three short weeks earlier (apparently with zero Due Diligence) following massive losses, and whose failure even Portugal's president Silva finally admitted could be a systemic event, the local Diario Economic reports that Banco Espirito Santo is about to be nationalized, i.e. bailed out.
The details from Bloomberg, about the transaction that will wipe out the existing equity and replace it with 100% ownership by the Resolution Fund:
- Portugal may use the Resolution Fund to recapitalize Banco Espirito Santo, Diario Economico reports, citing unidentified people linked to the process.
- Resolution Fund may inject more than €3 billion
- A “bad bank” may be created for the toxic assets of the credit portfolio
- Solution aims to rescue Banco Espirito Santo without spending taxpayers’ money, and is being prepared by the government and the Bank of Portugal
- From Aug. 4, Banco Espirito Santo will leave the stock market and will be 100% owned by the Resolution Fund, an entity created in 2012 and financed by Portuguese banks and by revenue from the special contribution that the banking sector pays the Portuguese state
- Resolution Fund will have to be given enough resources to capitalize Banco Espirito Santo, and according to legislation this can be done through a state loan or through a new special contribution imposed on the 84 institutions that contribute to the fund
- Part of the €6.4b that the Portuguese state still has available in the bank recapitalization facility that was included in Portugal’s bailout program may also be used to give the Resolution Fund the necessary resources to capitalize Banco Espirito Santo
- Portuguese authorities’ plans predict that the bank will be sold in the stock market within six months, with the proceeds from the sale being used to repay the Resolution Fund
So Portugal's "less insolvent" smaller banks will fund the bailout facility to rescue the nation's most insolvent mega bank. What can possibly go wrong...
Incidentally, the most fun we had was the part where they said no taxpayer money (read German) would be used to bail out yet another insolvent European bank.
So much for Europe's self-sustaining recovery in which no bank will be henceforth rescued.
That said, expect some combination of bail-out with bail-in elements, meaning the sub bonds are most likely about to be wiped out as well.
Alarm Bells Ringing: Behind The Smoke And Mirrors Of The European Banking System
Submitted by Tyler Durden on 08/02/2014 21:01 -0400
Submitted by Erico Matias Tavares of Sinclair & Co.
Alarm Bells Ringing - Behind the Smoke and Mirrors of the European Banking System
Alarm bells in the European banking system have been ringing for quite a while but nobody seems to be listening. The roaring capital markets are just too loud.
But we have been keeping track of a few things.
Private sector lending is dropping sharply in the Eurozone. The latest figures have just been released and the picture is not at all encouraging. Total private sector credit by Eurozone monetary financial institutions has accentuated its negative trajectory last June, with lending to households seeing the largest monthly decline since the height of the great financial crisis in late 2008. Uh-oh.
Periphery back in play? Very recently the second largest private bank in Portugal was caught in the bankruptcy of the Espirito Santo conglomerate, reporting the largest ever corporate loss in the country’s history just last Wednesday, and raising the specter that all might not be well in the Eurozone’s periphery. Now the Portuguese government may be forced to intervene, possibly using a very large chunk of the financial sector stabilization funds set aside during the country’s recent bailout.
BIS issues a(nother) warning. This should not be a surprise. In its 2014 annual report, released at the end of June, the Bank of International Settlements (“BIS”) warned that “banks that have failed to adjust post-crisis face lingering balance sheet weaknesses from direct exposure to overindebted borrowers and the drag of debt overhang on economic recovery”, with this situation being the most acute in Europe. It also stated that increases in government debt ratios in several cases appear to be on an unsustainable path. It appears that debt levels matter for (some) economists after all.
Bad loans rising. Before we had Fitch, the ratings agency, stating last May that in a sample of 124 Eurozone banks which participated in the latest stress test impaired loans increased by an average of 8% in 2013, with no less than 30 banks seeing an increase of 20%. This could have certainly contributed to the massive contraction in private sector credit that we are now seeing on its own. But there’s more.
Emerging dangers. Trillions more in fact. In February Reuters reported that European banks have loaned in excess of $3 trillion to emerging markets – a little less than the entire GDP of Germany, and more than four times the exposure of US lenders to those countries. Fitch chimed in saying that “a handful of large EU banks are materially exposed to more fragile emerging markets.” While direct risks might be manageable for these banks, any contagion might be another story. Is an Argentinean default truly contained? Are Turkey’s problems solved? What happens if the latest EU/US sanctions hit Russian banks or companies hard?
Where’s the capital? Another eye-opener came over a year ago. In April 2013, Jakob Vestergaard and María Retana at the Danish Institute for International Studies published "Smoke and Mirrors: On the Alleged Recapitalization of European Banks", a report partially funded by the World Bank. The title says it all. According to the authors, by using broad capital measures based on risk-weighted assets European banking regulators have overstated the banks’ soundness and resilience in their stress assessments. Accordingly, “recent increases in risk weighted capital ratios have been little more than a smokescreen.”
By focusing on leverage ratios instead, the authors reached some interesting conclusions. The least well-capitalized banking sector among the larger Eurozone countries is not the Spanish or Italian… but the German, closely followed by the French! According to their estimates, a five-fold increase in equity capital is needed in order to reach “adequate” levels of soundness. It is well worth reading the entire report, including the discussion on why regulators seem to be consistently behind the ball on bank recapitalization.
Submitted by Tyler Durden on 08/02/2014 - 17:18
The conflict in Ukraine and the related imposition of sanctions against Russia signal an escalation of geopolitical tensions that isalready being felt in the Russian (and increasingly world) financial markets. As The IMF describes in this chartapalooza, a deterioration in the conflict, with or even without a further escalation of sanctions and counter-sanctions, could have a substantial adverse impact on the Russian economy through direct and indirect (confidence) channels. But, perhaps more importantly to the West-sponsored IMF, what would be the repercussions for the rest of Europe if there were to be disruptions in trade or financial flows with Russia, or if economic growth in Russia were to take a sharp downturn?
Submitted by Tyler Durden on 08/01/2014 - 19:34
The European Union (EU) is still in the midst of an economic slump. Many members of the political class in Brussels claim that fiscal austerity is to blame. But, this diagnosis is wrong. It's time for the public to stop listening to the EU's anti-austerity hypocrites and start looking at the numbers.
Submitted by Tyler Durden on 08/01/2014 - 11:40
But but but... the crisis is over and Europe is recovering? European stocks dropped 3.2% in the last 2 days - the most in 7 months - taking the broad index into the red for 2014. Portugal (remember how BES was contained) collapsed 10.3% this week (down 26% from its highs in April) to one-year lows. Europe's VIX spiked over 20 today - its highest in over 4 months.
Russia Accuses US Of Fabricating Satellite Images, Creating "Wall Of Propaganda" To Incite Other CountriesSubmitted by Tyler Durden on 08/02/2014 - 15:47
It was ten days ago when on the heels of Russia's 30-minute detailed presentation of what it believes happened to MH-17, the US government released a satellite trajectory map of what it says was the flight's path and the site from which the missile was shot as well as various other satellite images "proving" the missile that took down the Boeing 777 was fired by the pro-Russian separatists. Yesterday the Russian defense ministry finally responded to the US release stating that the "satellite images Kiev published as ‘proof’ it didn’t deploy anti-aircraft batteries around the MH17 crash site carry altered time-stamps and are from days after the MH17 tragedy." In other words, the evidence the US has present to form public opinion was in the form of "altered images carrying wrong time-stamps."
Submitted by Tyler Durden on 08/01/2014 - 19:03
Having publicly shunned President Obama, it appears Turkish Prime Minister Erdogan has no problem upsetting the status quo. As Reuters reports, the fifth cargo of crude oil from Iraqi Kurdistan was loading at Turkey's Mediterranean port of Ceyhan on Thursday and was scheduled to set sail on Friday, Turkish energy officials said. Baghdad is unhappy - missing out on the oil revenues. We are sure US is unhappy - oil being sold out of its control. And OPEC may be getting upset as it appears an'anonymous' buyer is more than willing to buy the oil from the 'not sovereign status' seller militia at a healthy discount. De-petrodollarization?
Submitted by Tyler Durden on 08/01/2014 - 22:17
So much for the "Russia is becoming increasingly isolated" meme that the West would like many to believe. As Russia continues to sign de-dollarization deals and trade agreements with its BRICS allies while pushing ahead with retaliatory actions against the US and Europe, it appears the 'sanctioned' friends of Putin are taking matters into their own hands. Billionaire oligarch Gennady Timchenko, among the first to be hit by travel bans and asset freezes by the US, has decided to tear up his Visa and Mastercard, shifting all his credit cards to China's UnionPay,noting that "in some ways it is more secure than Visa - at least the Americans can't reach it."
Submitted by Tyler Durden on 08/01/2014 - 21:00
As long as people remain obsessed with false paradigms and faux enemies, the establishment's goal of complete centralized dominance will be predictably attainable. If we change our focus to the internationalists as the true danger instead of playing their game by their rules, then things will become far more interesting...