• Tag Archives Banking Crisis
  • The Secret History Of The Banking Crisis

    Accounts of the financial crisis leave out the story of the secretive deals between banks that kept the show on the road. How long can the system be propped up for?
    ***
    It is a decade since the first tremors of what would become the Great Financial Crisis began to convulse global markets. Across the world from China and South Korea, to Ukraine, Greece, Brexit Britain and Trump’s America it has shaken our economy, our society and latterly our politics. Indeed, it has thrown into question who ‘we’ are. It has triggered both a remarkable wave of nationalism and a deep questioning of social and economic inequalities. Politicians promise their voters that they will ‘take back control.’ But the basic framework of globalisation remains intact, so far at least. And to keep the show on the road, networks of financial and monetary co-operation have been pulled tighter than ever before.
    In Britain the beginning of the crisis was straight out of economic history’s cabinet of horrors. Early in the morning of Monday 14th September 2007, queues of panicked savers gathered outside branches of the mortgage lender Northern Rock on high streets across Britain. It was – or at least so it seemed – a classic bank run. Within the year the crisis had circled the world. Wall Street was shaking, as was the City of London. The banks of South Korea, Russia, Germany, France, Belgium, the Netherlands, Ireland and Iceland were all in trouble. We had seen nothing like it since 1929. Soon enough Ben Bernanke, then chairman of the US Federal Reserve and an expert on the Great Depression, said that this time it was worse.

    This post was published at Zero Hedge on Aug 9, 2017.


  • China’s Minsky Moment Is Imminent

    Crescat Capital’s Q2 letter to investors shouold be retitled “everything you wanted to know about the looming bursting of the world’s biggest credit bubble… but were afraid to ask…” Don’t say we didn’t warn you…
    History has proven that credit bubbles always burst. China by far is the biggest credit bubble in the world today. We layout the proof herein. There are many indicators signaling that the bursting of the China credit bubble is imminent, which we also enumerate. The bursting of the China credit bubble poses tremendous risk of global contagion because it coincides with record valuations for equities, real estate, and risky credit around the world.
    The Bank for International Settlements (BIS) has identified an important warning signal to identify credit bubbles that are poised to trigger a banking crisis across different countries: Unsustainable credit growth relative to gross domestic product (GDP) in the household and (non-financial) corporate sector. Three large (G-20) countries are flashing warning signals today for impending banking crises based on such imbalances: China, Canada, and Australia.

    This post was published at Zero Hedge on Aug 6, 2017.


  • Geopolitical Risk, Business, and Investment

    When people think about geopolitics, they tend to think about war, as if the two issues were the same. But that is only partly true.
    Geopolitics is the study of the power of nation states, and war is certainly a determinant of power. But it is only one of many. Things like economics, politics, ideology, and technology work together to form national power, and however useful it may be to learn about any single element, they are inseparable. It’s for this reason that the situation in North Korea is (rightly) seen as a geopolitical problem but the Italian banking crisis (wrongly) is not.
    Before we begin…
    At the risk of stating the obvious, Warren Buffett is an extraordinary forecaster. At the risk of displaying hubris, I am struck by how similar his approach to forecasting the future of companies is to our method of forecasting geopolitics.
    At Geopolitical Futures, we have pinpointed a way that our similarities can benefit you. You’ll find out more at the bottom of this issue.
    But for now, let’s dig in to This Week in Geopolitics.
    Rooted in Geography
    Multifaceted though it may be, geopolitics is nonetheless rooted in geography. Geography dictates what is possible and what is impossible. Iceland, for example, can never conquer Europe, nor will it become a major industrial power.

    This post was published at Mauldin Economics on JULY 10, 2017.


  • ECB Declares Two Italian Banks Have Failed

    The European Central Bank (ECB) has announced as of June 23rd, that it was declaring two Italian banks insolvent. Veneto Banca SpA and Banca Popolare di Vicenza SpA have failed since the two banks repeatedly violated the regulatory capital requirements. The determination was made in accordance with Article 18 (1a) and Article 18 (4a) of the Uniform Resolution Mechanism Regulation.
    The European banking crisis continues.

    This post was published at Armstrong Economics on Jun 24, 2017.


  • Suicide Over European Banking Crisis

    The European ‘bail-in’ rules have been cheered claiming taxpayer money will be spared. However, many seniors bought bank bonds for their retirement. In the rescue of the small Banca Popolare d’Etruria, a retiree who had lost more than 100,000 euros worth of bonds lost everything and committed suicide. There have been many such events that do not always make the press. In Italy, the death of a pensioner who also committed suicide after losing his life savings as a result of a controversial move by the government to rescue four banks. The 68-year-old hung himself at his home in Civitavecchia, a port town near Rome, after the so-called ‘save banks’ plan wiped out 100,000 in savings held at Banca Etruria, one of the four lenders included in the government rescue deal announced on November 22nd, 2015. There was the 23-year old who committed suicide over 8000 in debts for student loans. A Greek pensioner who was 77-years old committed suicide in central Athens shooting himself with a handgun just several hundred meters from the Greek parliament building in apparent despair over his financial debts.

    This post was published at Armstrong Economics on Jun 19, 2017.


  • Fear of Contagion Feeds the Italian Banking Crisis

    At first, deny, deny, deny. Then taxpayers get to bail out bondholders.
    By Don Quijones, Spain & Mexico, editor at WOLF STREET.
    Spain’s Banco Popular had the dubious honor of being the first financial institution to be resolved under the EU’s Bank Recovery and Resolution Directive, passed in January 2016. As a result, shareholders and subordinate bondholders were ‘bailed in’ before the bank was sold to Santander for the princely sum of one euro.
    At first the operation was proclaimed a roaring success. As European banking crises go, this was an orderly one, reported The Economist. Taxpayers were not left on the hook, as long as you ignore the 5 billion of deferred tax credits Santander obtained from the operation. Depositors and senior bondholders were spared any of the fallout.
    But it may not last for long, for the chances of a similar approach being adopted to Italy’s banking crisis appear to be razor slim. The ECB has already awarded Italy’s Monte dei Paschi di Siena (MPS) a last-minute reprieve, on the grounds that while it did not pass certain parts of the ECB’s last stress test, the bank is perfectly solvent, albeit with serious liquidity problems.

    This post was published at Wolf Street by Don Quijones ‘ Jun 16, 2017.


  • ‘Bail-In’ Era for Europe’s Banking Crisis Begins

    Many Banco Popular investors wiped out. Taxpayers off the hook. What it means for Italy. Banco Popular, until today Spain’s sixth biggest bank, is no more. Its assets, including a massive portfolio of small-business clients, now belong to Banco Santander, Spain’s biggest bank. The global giant now has 17 million customers in Spain, a country of just 45 million people. The price was 1.
    Spain’s Ministry of the Economy revealed that by 3 pm Tuesday, Popular was no longer able to contain the deposit outflow. ‘It had exhausted all its lines of liquidity, both ordinary and extraordinary.’ It had run out of collateral to cover any further lines of emergency liquidity.
    This apparently triggered the intervention by the ECB’s Single Resolution Board (SRB), which decided on Tuesday that the bank ‘was failing or likely to fail’ and would have to be wound down, unless a buyer could be found.

    This post was published at Wolf Street on Jun 7, 2017.


  • Deposit Bail In Risk as Spanish Bank’s Stocks Crash

    – Deposit bail in risk as stocks and bonds of Spanish bank – Banco Popular – crash
    – Banco Popular stock crashes most on record – down 63% this year to 34 euro cents
    – Spanish bank tells employees – ‘Don’t panic’
    – Risk of Spanish banking crisis as Banco Popular credit curve inverts
    – Banco Popular needs to find at least 4 billion more capital – analysts
    – Deposits over 100,000 (euro) vulnerable to bail-in
    – EU, U. S., UK push for bank ‘bail-ins’ poses risks to depositors
    Banco Popular’s shares crashed another 17 per cent yesterday to record lows amid concerns the Spanish bank may have to be ‘wound down’ and could see bail-ins of investors and depositors.
    There are increasing fears that there is no buyer for the bank and this saw its share price dropped to 0.34 (34 euro cents). The bank’s stocks had already fallen nearly 50 per cent in the last week and is down 63% this year.

    This post was published at Gold Core on June 6, 2017.


  • Spanish Banking Crisis Spreads As Banco Popular Credit Curve Inverts

    Having told its employees “don’t panic” over the weekend (at the crashing stock and bond prices of Spain’s 6th largest bank), it appears investors are ignoring that message as Banco Popular’s credit curve has inverted for the first time since 2012 in the biggest red flag yet that Spain’s banking crisis is systemic and about to test the EU’s bail-in laws.
    Banco Popular Chairman Emilio Saracho sent a letter to staff assuring them the bank remains solvent after Friday’s stock crash, courtesy of Expansion, google translated:
    “From the management we are aware that the information that is being published affects the work and the spirit of each one of you, but our obligation as professionals is to focus on the day to day and on the clients, since the activity of the bank must continue as it has so far” begins the statement, whose target is the Professional Association of Directors Banco Popular.
    The central message of this letter sent yesterday is the following: “Banco Popular remains solvent and has positive net worth”.
    “Our bank is in a difficult situation,” says Saracho. “For this reason and in order to meet the regulatory requirements that the European Central Bank demands for next year and guarantee our strength and future, we are working on different alternatives.

    This post was published at Zero Hedge on Jun 5, 2017.


  • Shock Waves Spread from Spain’s New Banking Crisis

    Has the time finally come to test the EU’s bail-in law? ****
    The shares of Spain’s sixth biggest bank, Banco Popular, plunged 36% this week to 0.43, reducing the bank’s market capitalization to 1.7 billion. Just three weeks ago, when there was still a glimmer of hope that things could be turned around, it was worth almost double that. Its shares traded at 15 ten years ago, before the collapse of Spain’s mind-boggling housing bubble that left Popular holding billions of euros of real estate assets.
    Popular may not be a systemically important institution, but it’s nonetheless an institution of great import. It has the largest portfolio of small business customers in Spain and enjoys the patronage of one of Spain’s most influential institutions, Opus Dei. Its well-heeled members are among the bank’s most important shareholders and investors, and they stand to lose a lot of money if a last-minute buyer is not found soon.
    This is an outcome that can no longer be discounted, especially after reports emerged on Thursday that senior officials of the ECB’s regulatory arm, the Single Supervisory Mechanism, had warned the bank could be wound down if it fails to find a buyer. But the EU agency charged with overseeing bank failures later issued a statement saying it ‘never issues warnings about banks.’

    This post was published at Wolf Street on Jun 3, 2017.


  • ABOUT JUNE 2/HORRENDOUS JOBS REPORT SENDS GOLD AND SILVER MUCH HIGHER/GOLD SHARES HOWEVER MUCH SUBDUED/TWO BANKING CRISIS MOMENTS TODAY: ONE FROM ITALY AND ONE FROM SPAIN/GYMBOREE IN THE USA READ…

    GOLD: $1276.20 up $9.80
    Silver: $17.49 up 25 cent(s)
    Closing access prices:
    Gold $1279.00
    silver: $17.57
    XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
    SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)
    SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
    SHANGHAI FIRST GOLD FIX: $127073 DOLLARS PER OZ
    NY PRICE OF GOLD AT EXACT SAME TIME: 1262.90
    PREMIUM FIRST FIX: $7.83

    This post was published at Harvey Organ Blog on June 2, 2017.


  • Here’s Why Italy’s Banking Crisis Has Gone Off the Radar

    Just how many banks are insolvent? Turns out, a lot! But elections are coming up.
    For a country that is on the brink of a gargantuan public bailout of its toxic-loan riddled banking sector, or failing that, a full-blown financial crisis that could bring down the European financial system, things are eerily quiet in Italy these days. It’s almost as if the more serious the crisis gets, the less we hear about it – otherwise, investors and voters might get spooked. And elections are coming up.
    But an article published in the financial section of Italian daily Il Sole lays out just how serious the situation has become. According to new research by Italian investment bank Mediobanca, 114 of the close to 500 banks in Italy have ‘Texas Ratios’ of over 100%. The Texas Ratio, or TR, is calculated by dividing the total value of a bank’s non-performing loans by its tangible book value plus reserves – or as American money manager Steve Eisman put it, ‘all the bad stuff divided by the money you have to pay for all the bad stuff.’
    If the TR is over 100%, the bank doesn’t have enough money ‘pay for all the bad stuff.’ Hence, banks tend to fail when the ratio surpasses 100%. In Italy there are 114 of them. Of them, 24 have ratios of over 200%.

    This post was published at Wolf Street on Mar 30, 2017.


  • EU Banking Crisis Meets Euro-TARP on Angel Dust

    If the ECB scales back stimulus, banks face even greater risk of collapse. But now there’s a new solution.
    By Don Quijones, Spain & Mexico, editor at WOLF STREET. Events are moving so fast in Europe these days, it’s almost impossible to keep up. While much of the attention is being hogged by political developments, including the election in the Netherlands, Reuters published a report warning that the European banking sector may face even higher bad loan risks if the ECB begins to scale back its monetary stimulus programs, something it has already begun, albeit extremely tentatively.
    The total stock of non-performing loans (NPL) in the EU is estimated at over 1 trillion, or 5.4% of total loans, a ratio three times higher than in other major regions of the world.
    On a country-by-country basis, things take look even scarier. Currently 10 (out of 28) EU countries have an NPL ratio above 10% (orders of magnitude higher than what is generally considered safe). And among Eurozone countries, where the ECB’s monetary policies have direct impact, there are these NPL stalwarts:
    Ireland: 15.8% Italy: 16.6% Portugal: 19.2%

    This post was published at Wolf Street by Don Quijones ‘ Mar 17, 2017.


  • Canada Flagged for Recession by BIS

    As if Canadians needed more proof that the country’s real estate is in a bubble, and that this misallocation has spread to other sectors of the economy, the Bank of International Settlements released its latest quarterly confirming what any critical observer can see: binging on debt is rarely a good idea.
    Canada’s debt-to-GDP gap is widening and even the central bank of central banks is concerned.
    The BIS uses its credit-to-GDP analysis as an indicator and predictor of troubling economic waters. They claim successes in predicting financial crises in the United States, England and a few other economies. Generally speaking, according to the BIS, when a country’s credit-to-GDP gap is higher than 10% for more than a few years, a banking crisis emerges which is followed by a recession.
    Canada entered that territory in 2015, warmly welcomed by the Chinese who’s debt-to-GDP gap has put them in the danger zone for at least the last five years.
    In another parallel universe, perhaps Canadian authorities took the correct measures to counteract this high credit-to-GDP gap or to even prevent it from getting this out of control. But in our reality, we kept trudging across the tundra, mile after mile, pushing our credit-to-GDP gap up to 17.4%.

    This post was published at Mises Canada on MARCH 13, 2017.


  • Is that Desperation Hanging Over Europe’s Banking System?

    Turns out, Italy’s banking crisis is not fixed.
    By Don Quijones, Spain & Mexico, editor at WOLF STREET.
    Many of Europe’s and America’s biggest banks have begun begging, cap in hand, for a new, innovative way of raising vast sums of dirt-cheap debt on Europe’s financial markets.
    The Association for Financial Markets in Europe (AFMA), an organization that prides itself on serving as ‘the voice of Europe’s wholesale financial markets,’ just sent a strongly worded letter to the European Central Bank, urging for the prompt creation of EU-wide regulation allowing banks to sell a newfangled class of bail-in-able debt called ‘senior non-preferred bonds.’
    ‘A swift agreement is essential to enable banks to continue increasing their loss-absorbing cushions and improve their resolution capacity,’ says the letter (translated from Spanish).

    This post was published at Wolf Street by Don Quijones ‘ Feb 25, 2017.