PowerSwitch Main Page
PowerSwitch
The UK's Peak Oil Discussion Forum & Community
 
 FAQFAQ   SearchSearch   MemberlistMemberlist   UsergroupsUsergroups   RegisterRegister 
 ProfileProfile   Log in to check your private messagesLog in to check your private messages   Log inLog in 

European Bank crisis
Goto page Previous  1, 2, 3, 4, 5  Next
 
Post new topic   Reply to topic    PowerSwitch Forum Index -> General Discussion
View previous topic :: View next topic  
Author Message
raspberry-blower



Joined: 14 Mar 2009
Posts: 1453

PostPosted: Wed Dec 21, 2016 10:24 pm    Post subject: Reply with quote

Don Quijones: Italy's Banking Crisis is also a Huge Crime Scene

Don Quijones wrote:
Yet, as has happened in just about every Western jurisdiction since the Global Financial Crisis (bar Iceland, of course), no one will be held to account for the myriad alleged white-collar crimes, misdeeds and misdemeanors that paved the way to Italys unfolding banking crisis. As in Spain, high-profile investigations will be launched and trials will be held, yet they will lead nowhere. And they will take years getting there.


About the sum of it
_________________
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
Back to top
View user's profile Send private message
raspberry-blower



Joined: 14 Mar 2009
Posts: 1453

PostPosted: Sun Feb 05, 2017 9:54 pm    Post subject: Reply with quote

Don Quijones: Italy's "Bad Banks" Created to save the Banking System, are themselves on the verge of collapse

Don Quijones wrote:
The two bad banks worsening woes are a reminder of the gargantuan task facing the Italian government as it attempts to stabilize the countrys banking system, which is creaking under a bad debt overhang of 356 billion a third of the Eurozones total. Unicredits decision to write down its investment in Atlante is almost certain to discourage the private sector from pumping fresh funds into Atlante to bail out weaker banks.

That in turn puts more pressure on Rome, increasing doubts over whether its current bailout kitty of 20 billion will be enough to stabilize the Eurozones fourth-biggest banking system. The government has already earmarked about a third of that money to rescue MPS alone. The 20 billion euros the government has set aside is starting to look like small beer, Milan-based banking analyst Vincenzo Longo of brokerage IG told Reuters.


All going to plan then Twisted Evil Twisted Evil Twisted Evil
_________________
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
Back to top
View user's profile Send private message
emordnilap



Joined: 05 Sep 2007
Posts: 13974
Location: Houǝsʇlʎ' ᴉʇ,s ɹǝɐllʎ uoʇ ʍoɹʇɥ ʇɥǝ ǝɟɟoɹʇ' pou,ʇ ǝʌǝu qoʇɥǝɹ˙

PostPosted: Mon Feb 06, 2017 10:54 am    Post subject: Reply with quote

20 billion? Ireland laughs at you, Italy. Our lot have paid out 40 billion in interest alone on bailout money.
_________________
"Buddhists say we come back as animals and they refer to them as lesser beings. Well, animals aren’t lesser beings, they’re just like us. So I say fụck the Buddhists" - Bjork


Last edited by emordnilap on Mon Feb 06, 2017 3:51 pm; edited 1 time in total
Back to top
View user's profile Send private message
fuzzy



Joined: 29 Nov 2013
Posts: 595
Location: The Marches, UK

PostPosted: Mon Feb 06, 2017 3:41 pm    Post subject: Reply with quote

emordnilap wrote:
20 billion? Ireland laughs at you, Italy. Out lot have paid out 40 billion in interest alone on bailout money.


I bet they then sold that 40 billion as bond issue to keep the plates spinning.
Back to top
View user's profile Send private message
kenneal - lagger
Site Admin


Joined: 20 Sep 2006
Posts: 9822
Location: Newbury, Berkshire

PostPosted: Mon Feb 06, 2017 4:59 pm    Post subject: Reply with quote

Makes you wonder how much of that bank bad debt money is now in the hands of the Mafia.
_________________
"When the last tree is cut down, and the last river has been poisoned, and the last fish has been caught, Only then will you find out that you cannot eat money". --The Cree Indians
Back to top
View user's profile Send private message Send e-mail Visit poster's website
johnhemming2



Joined: 30 Jun 2015
Posts: 1976

PostPosted: Mon Feb 06, 2017 7:46 pm    Post subject: Reply with quote

emordnilap wrote:
Our lot have paid out 40 billion in interest alone on bailout money.

I accept that some of the irish banks were just a black hole, but banks such as BOI have provided a profit to the irish government (and hence Irish people).

What is the net cost?

I think the figure of EUR40bn on interest is an exaggeration.

It was a big mistake to underwrite anglo-irish.
Back to top
View user's profile Send private message
raspberry-blower



Joined: 14 Mar 2009
Posts: 1453

PostPosted: Wed Jun 07, 2017 8:16 pm    Post subject: Reply with quote

Today Spanish bank Banco Popular was bought by Santander for the princely sum of 1 Euro. Source

Quote:
Santander will tap its shareholders for 7bn in a rights issue to raise the capital needed to shore-up Populars finances in a dramatic private sector rescue of Spains sixth-largest lender.

It will inflict losses of approximately 3.3bn on bond investors and shareholders but crucially will avoid a taxpayer bailout


So that's sorted out all of Spain's banking problems? Well this forced takeover may actually takedown Santander with it. A few days ago this article on Wolf Street puts everything into context:
Don Quijones: Shock waves spread from Spain's new banking crisis

Don Quijones wrote:
By now, the only bank that appears to still have a passing interest in buying Popular is Spains biggest bank, Santander, which would like nothing more than to get its hands on Populars retail business, in particular that massive portfolio of small business clients. But for that to happen, Populars over 30 billion of impaired real estate assets would have to be neutralized, almost certainly involving taxpayer funds. Something would also have to be done to nullify the class action law suits mushrooming on the other side of the Atlantic over Populars alleged misleading of investors in the lead-up to its last capital expansion, in 2016


Begs the question: is the 7 billion Euro rights call from Santander going to be anywhere near enough? Then what? A systemic collapse of Spain's banking sector is quite probable - will that trigger a Europe wide banking collapse?
_________________
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
Back to top
View user's profile Send private message
kenneal - lagger
Site Admin


Joined: 20 Sep 2006
Posts: 9822
Location: Newbury, Berkshire

PostPosted: Thu Jun 08, 2017 4:10 pm    Post subject: Reply with quote

This article in today's Capital and Conflict Newsletter puts the European banking problems in the shade. This compares Illinois' problems to Greece and there are three other US States with similar problems: all swept under the carpet.

Quote:
The other Greece
Greek GDP is around US$200 billion. The US state of Illinois is about four times the size. Their governments are both in dire financial straits for the same reason, but we only hear about Greece. I think Illinois will prove far more important to you in the end.

Illinois hasnt had a budget for two years. The governor of the state declared it to be a banana republic thanks to its governments complete lack of credibility. Debt ratings agencies have downgraded Illinois bonds eight times in recent years. The states treasury is refusing to pay its basic bills, with the unpaid amount over US$14 billion.

But Illinois debt-to-GDP ratio is below 20%. So whats the problem? Well US states dont collect anywhere near as much tax as the federal government. But more important are pensions. The state owes impossible amounts to former and future employees. But these arent counted in the official debt statistics.

Its a typical example why modern economics is useless. The figures are dodgy, the methods are iffy and therefore the conclusions are wrong. But the markets know better. And theyre getting worried about Illinois pensions. Thats why the bonds are steadily getting downgraded.

Illinois Supreme Court ruled that existing pension liabilities are not a political policy matter. Theyre a legal debt that must be paid or defaulted upon. Puerto Rico chose default recently. But its much smaller. And there are states in even worse positions than Illinois. Three in particular Massachusetts, Connecticut and New Jersey.

Its not much better overall though. According to the Government Accountability Office, state tax revenue as a per cent of GDP wont be back at 2007 levels until 2047!

What makes US states so interesting is that theyre like Greece, not Japan. They cant print their own money. This makes default and financial accountability far more real.

If you put the legal nature of pension obligations together with this inability to print money, you get a startling conclusion. Taxpayer funds will have to make up the difference to pay out all those pensions. And researchers from the Hoover Institution recently did the maths on where that leaves US states overall:

Even under states own disclosures and optimistic assumptions about future investment returns, assets in the pension systems will be insufficient to pay for the pensions of current public employees and retirees. Taxpayer resources will eventually have to make up the difference.

In aggregate, the 564 state and local systems in the United States covered in this study reported $1.191 trillion in unfunded pension liabilities (net pension liabilities) under GASB 67 in FY 2014. This reflects total pension liabilities of $4.798 trillion and total pension assets (or fiduciary net position) of $3.607 trillion. This accounts for roughly 97% of all public pension funds in the U.S. Taking into the account the pension funds penchant for manipulating (in their favor) the discount rates, the unfunded public sector pensions liabilities rise to $4.738 trillion.


Constantin Gurdgiev from the TrueEconomics blog puts the maths in understandable terms:

[] what is really going on is that the governments create a binding contract with their employees to loot - at some point in the future - the general taxation funds to cover the shortfalls on these contracts. How much looting is on the pensions liabilities? Take the unfunded liability estimate of $4.738 trillion. And consider that in 2014, total revenues collected by state and local governments stood at $1.487 trillion. Pensions deficits alone amount to 3.2 times the [governments] income. In household comparative terms, this is like having a full 100% mortgage on a second home, while still running a full 100% mortgage on primary residence (day-to-day expenses).


US states and their pension systems could be the crisis that ends the US safe haven status. And with it, the end of financial stability.

_________________
"When the last tree is cut down, and the last river has been poisoned, and the last fish has been caught, Only then will you find out that you cannot eat money". --The Cree Indians
Back to top
View user's profile Send private message Send e-mail Visit poster's website
raspberry-blower



Joined: 14 Mar 2009
Posts: 1453

PostPosted: Sat Jun 24, 2017 7:33 pm    Post subject: Reply with quote

The European Banking Crisis is unfolding along predicted lines.

On Thursday, over at Naked Capitalism, Yves Smith aired an insightful guest column:

Waiting for Godot or does anyone know what is going on with the Eurozone Banks?

Quote:
For several years I have communicated privately that I believe any Euro crisis will start in Spain and spread to Italy, which would be the keystone. I have come to believe it will not happen quickly but accumulate momentum over time. The ECB worked very hard a few years ago to strengthen the asset quality of Spanish banks and stabilize the Spanish banking system, while Italy had reorganized its small state banks prior to the Great Financial Crisis (Spain had not).




Well the banking crisis has reached Italy. On Friday Bloomberg ran an op piece that sounded the alarm about what was about to happen and what it meant to the ECB regulatory authority.

Bloomberg: Europe's Banking Union is dying in Italy

Quote:

The Italian government looks set to put Veneto Banca and Banca Popolare di Vicenza, two troubled regional lenders, into liquidation, selling off the good assets to a rival bank for a symbolic price. The toxic assets would be transferred to a bad bank, mostly funded by the government. Shareholders and junior bond-holders would contribute to the rescue, while senior creditors would be spared.

The rival bank, Intesa Sanpaolo, would be getting a great deal for little risk. But for the Italian taxpayer, and the credibility of euro zone financial regulation, the plan is a loser and should be stopped.

The Italian scheme is radically different from the one put in place two weeks ago, when the Spanish lender Banco Santander bought Banco Popular for one euro. In that case Santander also acquired Popular's non-performing loans as well as all the future legal risks. It also immediately went to the markets to raise capital to pay for it.

Well actually, Banco Santander raised 7 billion Euros to cover debts believed to be in excess of 37 billion Euros.


Quote:
Here, Intesa will only pick the assets it wants and insists that the operation not impact its capital ratio.



This plan is a slap in the face of Italian taxpayers, who according to some estimates could end up paying around 10 billion euros ($11.1) for it. The government could have taken a less expensive route, involving the "bail in" of senior bondholders. It chose not to: Many of these instruments are in the hands of retail investors, who bought them without being fully aware of the risks involved. The government wants to avoid a political backlash and the risk of contagion spreading across the system. However, 10 billion euros is a whale of a premium to pay as an insurance against a contagion. And Rome may still face a backlash -- from taxpayers who will feel defrauded.

Most importantly, this plan is a dagger in the heart of the euro zone banking union. This was one of Europe's main responses to the sovereign debt crisis, designed to limit the contribution of taxpayers to bank rescues and to ensure all euro zone lenders faced a coherent set of rules.


Right so everyone is circumventing the rules laid down by the ECB. That should instil confidence in the market - NOT!

Well unlike the play, in the banking sense Godot does appear. After close of business on a Friday, in fact. (Strong shades of how the US dealt with the banking crisis in 2008/09 with banks being shuttered on Friday after close of business)

Wolf Richter: Two Italian Zombie Banks Shuttered on Friday evening

Wolf Richter wrote:
In early June, the two banks were instructed by the European Commission to raise an additional €1.25 billion in private capital. No one bit. Italy’s government then tried to persuade the European Commission and the ECB to water down the requirement to €600-800 million, and it urged Italian banks to chip in to the bank rescue fund.

All that failed. So this weekend, the Italian government gets to sit down together for a friendly chat to enact the necessary measures to protect depositors and senior bondholders in those two banks. Stockholders will be crushed. Junior bondholders will likely get slammed hard. And the Italian taxpayer might face some additional pain – all of it caused by many years of terrible and reckless bank management. The saga of the long-festering banking crisis has thus moved on to the next chapter


The slow motion train crash that is the European banking sector has entered a highly dangerous phase now
_________________
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
Back to top
View user's profile Send private message
emordnilap



Joined: 05 Sep 2007
Posts: 13974
Location: Houǝsʇlʎ' ᴉʇ,s ɹǝɐllʎ uoʇ ʍoɹʇɥ ʇɥǝ ǝɟɟoɹʇ' pou,ʇ ǝʌǝu qoʇɥǝɹ˙

PostPosted: Tue Jun 27, 2017 9:59 am    Post subject: Reply with quote

Quote:
senior creditors would be spared


Here we go again. Rolling Eyes

It's almost 10 years since the last so-called banking crisis and they traditionally ( Laughing ) happen once every 10 years. But the same people have been left in charge since 2008!
_________________
"Buddhists say we come back as animals and they refer to them as lesser beings. Well, animals aren’t lesser beings, they’re just like us. So I say fụck the Buddhists" - Bjork
Back to top
View user's profile Send private message
johnhemming2



Joined: 30 Jun 2015
Posts: 1976

PostPosted: Tue Jun 27, 2017 10:53 am    Post subject: Reply with quote

There is a creditor hierarchy. Those who hold equity have the biggest risk and potentially the biggest return. Subordinated debt holders normally have a fixed interest rate (which at the moment for UK institutions is around 6%), but are subordinated and get a higher rate because of their higher risk. Senior Bond holders are normally other banks or the central bank who assist with liquidity and deposit holders are deposit holders (people or businesses with bank accounts). They are guaranteed collectively up to EUR100K.

Hence if a bank goes bust first the stockholders should lose out, then the subordinated debt holders and then senior bond holders. To avoid a ripple effect the state tends to protect the senior bond holders.

A lot of the changes relating to banking were intended to ensure that the state does not protect subordinated bond holders.
Back to top
View user's profile Send private message
raspberry-blower



Joined: 14 Mar 2009
Posts: 1453

PostPosted: Fri Jun 30, 2017 10:09 am    Post subject: Reply with quote

More on the banking failures in Spain and Italy:

First, Banco Popular in Spain:

Don Quijones wrote:
Much of the money was being withdrawn by institutional clients, including global mega-fund BlackRock, Spain’s Social Security fund, Spanish government agencies, and city and regional councils, prompting accusations that Spain’s government was using insider knowledge to withdraw large amounts of public funds, which of course hastened Popular’s demise.

All the while, Spain’s Economy Minister was telling the bank’s less privileged investors, including retail shareholders and junior bondholders, that there was absolutely nothing to worry about. Those that believed him lost everything.


That sounds very familiar Evil or Very Mad

Don Quijones wrote:
According to the newly published report, the run on deposits did not end with Santander’s shotgun takeover of the bank. The day after the operation — a Wednesday — the money kept pouring out. The same happened on Thursday. On Friday, the deluge slowed a little. By Monday, the tide had finally turned, industry sources say. On that day, for the first time in a long time, Popular’s accounts witnessed more deposits than withdrawals.

To prevent a complete collapse of Popular, Santander had to inject €13 billion of its own funds into the bank’s accounts — one of the biggest one-off transfers of funds in recent Spanish history.



So Santander had to inject nearly double what it proposes to raise from shareholders to prevent a complete meltdown of its newly acquired "assets".

Over to Italy for the bank failures there:

Don Quijones wrote:
As everyone wonders why the ECB allowed the Italian government and bank bondholders to get off so lightly, in the process undermining the EU’s rules on bank resolution, perhaps even fatally, one should perhaps consider just how the insured deposits of the two Veneto-based banks (estimated worth: €11 billion) would have been covered in the event of a bail-in resolution, given that:
•Italy was one of 10 countries identified by the ECB in 2015 that (unlike Spain) wasn’t complying with EU rules on deposit guarantee schemes.
•Italy’s banks, whose responsibility it is to cover bank deposits, are in no shape at all to suddenly raise €11 billion of funds. They couldn’t even scratch together €1.2 billion of funds before the weekend.

The ECB’s decision to allow Italy to bail out senior creditors and support Intesa to take on those deposits (liabilities that have to be paid, not cash) was in part based on the fact that neither the government’s deposit guarantee program nor the banks were in a position to cover the Veneto Banks’ deposits. But Italy could have saved its taxpayers a lot of money by guaranteeing all deposits and letting senior bondholders pick over the crumbs


Don Quijones: Preliminary Autopsy of Banco Popular shows how fragile Europe's banking system is

The financial rules are there to be bent, broken or ignored Twisted Evil
_________________
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
Back to top
View user's profile Send private message
emordnilap



Joined: 05 Sep 2007
Posts: 13974
Location: Houǝsʇlʎ' ᴉʇ,s ɹǝɐllʎ uoʇ ʍoɹʇɥ ʇɥǝ ǝɟɟoɹʇ' pou,ʇ ǝʌǝu qoʇɥǝɹ˙

PostPosted: Fri Jun 30, 2017 10:16 am    Post subject: Reply with quote

Keeping your money in a bank is a little like going into hospital when you're ill.

One word: don't!
_________________
"Buddhists say we come back as animals and they refer to them as lesser beings. Well, animals aren’t lesser beings, they’re just like us. So I say fụck the Buddhists" - Bjork
Back to top
View user's profile Send private message
adam2
Site Admin


Joined: 02 Jul 2007
Posts: 6217
Location: North Somerset

PostPosted: Fri Jun 30, 2017 11:23 am    Post subject: Reply with quote

I see little risk in keeping MODEST sums in the bank.
Many payments are best made by direct debit, other purchases are better made by credit card, many fleabay sellers require or prefer paypal.
Cash may be required unexpectedly or away from home, a cashcard is then most useful.

All this points to the desirability of a bank account with a modest credit balance.

IMHO, a sensible credit balance is a minimum of a months income. A sensible maximum might be six months income.
If you lucky enough to have more than that, then it might be better to consider alternatives.

I would think twice about significant long term savings in a bank, but a modest balance in a current account is very useful.
_________________
"Installers and owners of emergency diesels must assume that they will have to run for a week or more"
Back to top
View user's profile Send private message
emordnilap



Joined: 05 Sep 2007
Posts: 13974
Location: Houǝsʇlʎ' ᴉʇ,s ɹǝɐllʎ uoʇ ʍoɹʇɥ ʇɥǝ ǝɟɟoɹʇ' pou,ʇ ǝʌǝu qoʇɥǝɹ˙

PostPosted: Fri Jun 30, 2017 12:18 pm    Post subject: Reply with quote

I'd say if a payment cannot be made by cash, then look elsewhere for the product.

You don't need a bank account to have a credit card.

Lots of modest amounts add up to quite a lot. I see no point in supporting banks when they are essentially corrupt overblown organisations, 'too big to fail' my arse. There should be an upper limit to the size of any financial institution and absolutely zero corporate welfare.

Banks really have no or little place in the private citizen's life. Credit unions, community banks, post offices, building societies and cash are far more desirable.
_________________
"Buddhists say we come back as animals and they refer to them as lesser beings. Well, animals aren’t lesser beings, they’re just like us. So I say fụck the Buddhists" - Bjork
Back to top
View user's profile Send private message
Display posts from previous:   
Post new topic   Reply to topic    PowerSwitch Forum Index -> General Discussion All times are GMT + 1 Hour
Goto page Previous  1, 2, 3, 4, 5  Next
Page 4 of 5

 
Jump to:  
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum


Powered by phpBB © 2001, 2005 phpBB Group