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It seems like it was just yesterday that Greek banks, which carry some €89BN of bad loans on their balance sheets, passed the ECB’s latest confidence building exercise, known as the “stress test.”

In retrospect that may have been premature, because as Bloomberg reports, over 8 years after its first bailout Greece is finally considering a plan to help its banks become viable, and speed up their bad-loan disposals in a bid to restore confidence in the crushed sector.

At its core, the Greek plan is the now familiar “bad bank” structure, in which banks get to spin off their NPLs into a separate, government-guaranteed SPV (although in the case of Greece, it is not clear if a government guarantee is all that valuable). The SPV would then be funded by selling bonds to the market.

While the details are still being worked out, an asset protection plan would see lenders unload some bad loans into special purpose vehicles, taking them off banks’ balance sheets. The SPVs would issue bonds, some guaranteed by the state, and sell them to investors, the people said, asking not to be named as the information isn’t public.

The move came after a furious selloff in Greek stocks, and especially banks, which was the culmination of a YTD plunge which has seen Greek banks lose more than 40% this year amid doubts they can clean up their balance sheets fast enough. The banks, which amusingly all cleared the ECB’s stress test earlier this year despite being saddled with tens of billions of NPLs, have been under mounting pressure from supervisors to cut their bad-debt holdings.

According to Bloomberg, the plan appears to have been borrowed from Italy, which conducted a similar exercise to stabilize its own banking sector.

…click on the above link to read the rest of the article…

Third Greek Bailout Suddenly In Jeopardy: Creditors Warn Cash May Be Delayed If Elections Don’t Go As Desired

September 1, 2015

Third Greek Bailout Suddenly In Jeopardy: Creditors Warn Cash May Be Delayed If Elections Don’t Go As Desired

Just when everyone was convinced that the main “risk off” event of the summer, namely the Greek bailout, was safely tucked away and that having abdicated its sovereignty to its creditors and Germany in particular, who now hold the Greek banking system hostage courtesy of draconian capital controls, that Greece would continue to receive its monthly cash allotment just so it could repay creditors from its first two bailouts and would notmake headlines for the foreseeable future , Market News just reported that suddenly even the Greek bailout is no longer on autopilot as a result of the upcoming elections in three weeks, whose outcome is anything but assured.

According to Market News, “Greece’s international creditors may delay the first review of the country’s bailout until November, multiple EU sources told MNI Tuesday, pushing talks on potential debt relief further down the road as Greece prepares for snap national elections on September 20.”

And just in case it was not clear that Greek sovereignty is now entirely conditional on the Greek people voting precisely as the Troika requires, and for a continuation of the austerity terms delineated in the 3rd Greek bailout, MNI reports that “officials will also stress that any new government that emerges from this month’s poll must meet the current bailout terms in order to release the E3 billion pending from the its first loan tranche and have already warned the interim government to continue with the implementation of prior actions set for September.”

In other words more of the same: Greece pretending to reform, creditors pretending to inject funds into the Greek economy:

“Realistically speaking, the inspectors’ return to Greece might be delayed and the first assessment could take place in November instead of October. In such an event I don’t expect talks about another Greek debt relief to run simultaneously,” a top Commission source said.

…click on the above link to read the rest of the article…

Greek Capital Controls To Remain For Months As Germany Pushes For Bail-In Of Large Greek Depositors

July 26, 2015

Greek Capital Controls To Remain For Months As Germany Pushes For Bail-In Of Large Greek Depositors

Two weeks ago we explained why Greek banks, which Greece no longer has any direct control over having handed over the keys to their operations to the ECB as part of Bailout #3’s terms, are a “strong sell” at any price: due to the collapse of the local economy as a result of the velocity of money plunging to zero thanks to capital controls which just had their 1 month anniversary, bank Non-Performing Loans, already at €100 billion (out of a total of €210 billion in loans), are rising at a pace as high as €1 billion per day (this was confirmed when the IMF boosted Greece’s liquidity needs by €25 billion in just two weeks), are rising at a pace unseen at any time in modern history.

Which means that any substantial attempt to bailout Greek banks would require a massive, new capital injection to restore confidence; however as we reported, a recapitalization of the Greek banks will hit at least shareholders and certain bondholders under a new set of European regulations—the Bank Recovery and Resolution Directive—enacted at the beginning of the year. And since Greek banks are woefully undercapitalized and there is already a danger of depositor bail-ins, all securities that are below the depositor claim in the cap structure will have to be impaired, as in wiped out.

Now, Europe and the ECB are both well aware just how insolvent Greek banks are, and realize that a new recap would need as little as €25 billion and as much as €50 billion to be credible (an amount that would immediately wipe out all existing stakeholders), and would also result in a dramatic push back from local taxpayers. This explains why Europe is no rush to recapitalize Greece – doing so would reveal just how massive the funding hole is.

…click on the above link to read the rest of the article…

Greece crisis: Banks reopen as government eyes return to normalcy

July 20, 2015

Greece crisis: Banks reopen as government eyes return to normalcy

Stock market remains closed

Greek banks opened their doors Monday for the first time in over three weeks, a move that the government hopes will help the economy get back to normal following a period dominated by fears over the country’s future in the euro.

Still, strict controls on the amounts individuals can withdraw remain and new austerity taxes demanded by the country’s European creditors mean that most everyday items are more expensive — from coffee to taxis to cooking oil.

In downtown Athens, people queued up in an orderly fashion as the banks unlocked their doors at 8 a.m., but restrictions on most transactions remained.

Though the daily cash withdrawal limit stayed at 60 euros, the government has given individuals a new weekly limit of 420 euros from this coming Sunday so they don’t need to trudge to the ATM every day.

Ready cash is something Greeks will need as new taxes also came into effect on a wide array of goods and services Monday.

Sales taxes have risen from 13 per cent to 23 per cent on many basic goods — including some meats, cooking oils, coffee, tea, cocoa, vinegar, salt, flowers, firewood, fertilizer, insecticides, sanitary towels and condoms.

Popular services were also hit by the new taxes: restaurants and cafes, funeral homes, taxis, ferries, cram schools and language schools.

The new taxes are part of a package of confidence-building measures that the Greek government had to introduce in order for negotiations on a third bailout to begin.

Since the Greek parliament passed the measures, creditors have sought to relieve the pressure on Greece. The European Central Bank has raised the amount of liquidity assistance on offer to Greek banks while Greece’s partners in the 19-country eurozone agreed to give Athens a short-term loan so it wouldn’t default on a 4.2 billion-euro debt due to the ECB on Monday.

…click on the above link to read the rest of the article…

Greek Banks Will Not Re-Open Monday Even As Loan To Repay ECB Approved

July 17, 2015

Greek Banks Will Not Re-Open Monday Even As Loan To Repay ECB Approved

The timing could not be worse from a visual perspective but within minutes of the Eurogroup confirming that they approved the €7.16 billion bridge loan (which will merely be recycled back to The ECB to ensure the appearance of normalcy continues), local reports note that the Greek finance ministry says banks will not re-open on Monday (as promised).

The elites get their money…

Eurogroup statement:

On 17 July 2015, the Council adopted a decision granting up to €7.16bn in short term financial assistance to Greece under the European Financial Stabilisation Mechanism (EFSM).

The loan will have a maximum maturity of three months and will be disbursed in up to two instalments. It will allow Greece to clear its arrears with the IMF and the Bank of Greece and to repay the ECB, until Greece would start receiving financing under a new programme from the European Stability Mechanism (ESM).

Longer term programme

On 16 July the Eurogroup decided in principle to agree to a request made by Greece on 8 July 2015 for stability support over three years from the ESM. Once negotiated between the institutions and Greece and approved by the Eurogroup, the ESM assistance would be used, amongst other things, to repay the loan Greece receives under the EFSM.

Economic policy conditions

The Council also adopted a decision approving a macro-economic adjustment programme setting out specific economic policy conditions attached to the financial assistance. The reforms undertaken by Greece are aimed at improving the sustainability of its public finances and the regulatory environment. Specifically, Greece was required to adopt legislation to reform its VAT and pension systems, strengthen the governance of the Hellenic Statistical Authority (ELSTAT), and implement by 15 July 2015 the relevant provisions of the Treaty on Stability, Coordination and Governance. The adjustment programme will be set out in a memorandum of understanding (MOU).

…click on the above link to read the rest of the article…

The German Siege Of Greece Begins (No, This Is Not A Repeat From 1941)

July 7, 2015

The German Siege Of Greece Begins (No, This Is Not A Repeat From 1941)

Did you notice that Greece’s creditors are not rushing to offer the Greeks a new deal in the wake of the stunning referendum result on Sunday? In fact, it is being reported that the initial reaction to the “no” vote from top European politicians was “a thunderous silence“. Needless to say, the European elite were not pleased by how the Greek people voted, but they still have all of the leverage. In particular, it is the Germans that are holding all of the cards. If the Germans want to cave in and give the Greeks the kind of deal that they desire, everyone else would follow suit. And if the Germans want to maintain a hard line with Greece, they can block any deal from happening all by themselves. So in the final analysis, this is really an economic test of wills between Germany and Greece, and time is on Germany’s side. Germany doesn’t have to offer anything new. The Germans can just sit back and wait for the Greek government to default on their debts, for Greek banks to totally run out of cash and for civil unrest to erupt in Greek cities as the economy grinds to a standstill.

In ancient times, if a conquering army came up against a walled city that was quite formidable, often a decision would be made to conduct a siege. Instead of attacking a heavily defended city directly and taking heavy casualties, it was often much more cost effective to simply surround the city from a safe distance and starve the inhabitants into submission.

In a sense, that is exactly what the Germans appear to want to do to the Greeks. Without more cash, the Greek government cannot pay their bills. Without more cash, Greek banks are going to start collapsing left and right. Without more cash, the Greek economy is going to completely and utterly collapse.

…click on the above link to read the rest of the article…

The Biggest Greek Banks “Have Failed,” and “Resolving” Them Won’t Work: Fitch

July 4, 2015

The Biggest Greek Banks “Have Failed,” and “Resolving” Them Won’t Work: Fitch

It’s not like Fitch was ahead of the curve when it declared on Friday that the “four largest Greek banks have failed…” two days after downgrading them to “RD” (Restricted Default) because they’d defaulted on their depositors.

But Fitch shed a gloomy light on just how tough – or rather impossible – it will be to move forward so that these banks can re-open their doors, even if negotiations between Greece and its creditors can be brought back to life.

The four banks – National Bank of Greece, Piraeus Bank, Alpha Bank, and Eurobank Ergasias – account for 91% of Greek banking assets. Already bailed out twice since the Financial Crisis, their shares were penny stocks while they were still trading on the Athens Stock Exchange, now also shut down.

They have two toxic problems: they’re illiquid and insolvent. Either one would have been enough to topple them.

They’re illiquid because the Greeks have zero trust in them and have been desperately yanking their euros out while they still could.

These banks would have toppled long ago if it hadn’t been for the €40 billion the ECB injected into them directly and for another €89 billion in Emergency Liquidity Assistance (ELA) through the Bank of Greece. The money was then passed on to the Greeks via cash withdrawals. But last weekend, the ECB shut off the spigot.

And they’re insolvent because the quality of their assets – mostly loans extended to Greek businesses and individuals – has collapsed at a blinding speed and has wiped out their capital. According to Fitch, by the end of March, 36% of the outstanding loans were 90 days or more past due. These “arrears may since have risen significantly.”

Stories have been circulating how Greeks are “strategically defaulting” on their debts. From their point of view, banks were black holes. Why pay them? They were proven right. But it hastened the collapse of the banks.

…click on the above link to read the rest of the article…

And So It Begins – Greek Banks Get Shut Down For A Week And A ‘Grexit’ Is Now Probable

June 29, 2015

And So It Begins – Greek Banks Get Shut Down For A Week And A ‘Grexit’ Is Now Probable

Is this the beginning of the end for the eurozone? For years, European officials have been trying to “fix Greece”, but nothing has worked. Now a worst case scenario is rapidly unfolding, and a “Grexit” has become more likely than not. On Sunday, the European Central Bank announced that it was not going to provide any more emergency support for Greek banks. But that was the only thing keeping them alive. In order to prevent total chaos, Greek banks have been shut down for at least a week. ATMs are still open, but it is being reported that daily withdrawals will be limited to 60 euros. Of course nobody knows for sure if or when the banks will reopen after this “bank holiday” is over, so needless to say average Greek citizens are pretty freaked out right about now. In addition, the stock market in Greece is not going to open on Monday either. This is what a national financial meltdown looks like, and the nightmare that has been unleashed in Greece will soon start spreading to much of the rest of Europe.

This reminds me so much of what happened in Cyprus. Up until the very last minute, politicians were promising everyone that their money was perfectly safe, and then the hammer was brought down.

The exact same pattern is playing out in Greece. For example, just check out what one very prominent Greek politician said on television on Saturday…

“Citizens should not be scared, there is no blackmail,” Panos Kammenos, head of the government’s coalition ally, told local television. “The banks won’t shut, the ATMs will (have cash). All this is exaggeration,” he said.

…click on the above link to read the rest of the article…

Greek Contagion Spreads As Several Italian Bank Stocks Failed To Open

June 29, 2015

Greek Contagion Spreads As Several Italian Bank Stocks Failed To Open

While things have normalized since the open thanks entirely to the SNB’s aggressive EUR-buying, CHF-selling intervention (good to see that central banks have read the BIS’ report and have learned from their prior intervention mistakes), earlier this morning we got a snapshot of what happens if and when the SNB, and then the ECB itself, finally lose control when as a result of the Greek crisis the contagion promptly spread a few hundred kilometers west to Italy where as the WSJ reported, “several Italian banks failed to start trading on Monday as fears over a Greek debt default induced many investors to shed peripheral stocks, including Italian, with banks suffering the most.”

As the paper reported sales orders on Italian stocks, in particular financial stocks, piled up before the market opening. At the start, the sales orders were so numerous that the system couldn’t manage to process them, something that often happens when specific news causes a sell-off on a stock.

Theoretical prices for Italian banks–the prices at which they would have started trading–hovered around losses of 8% to 10% at the beginning of the trading session.

UniCredit SpA and Intesa Sanpaolo managed to start trading some time after the market opened, but were suspended immediately, accumulating losses of around 6% compared with Friday’s closing prices.

Ironically, in an attempt to avoid just this kind of selling panic, on Sunday, Italy’s banking lobby head Antonio Patuelli dismissed fears of contagion on Italian lenders, saying the country’s banks’ direct exposure to Greece was less than EUR1 billion.

For now the SNB has stabilized things but how much longer will this artificial “stability” continue especially if the just concluded speech by Jean-Claude Juncker managed to antagonize Greeks even further and pushed all those who were on the fence about this Sunday’s coming Greferendum, solidly into the “No” camp.

LEAKED (Denied then Confirmed): ECB Not Sure If Greek Banks Can Open Monday

June 19, 2015

LEAKED (Denied then Confirmed): ECB Not Sure If Greek Banks Can Open Monday

There seems to be a growing willingness in the Eurozone to get this over with, to let Greece default and go from there – with all the options that this might entail. But even if a last-minute bailout agreement materializes, one thing stands out in this sea of chaotic uncertainty: Greek banks are toast.

The top four – National Bank of Greece, Piraeus Bank, Alpha Bank, and Eurobank Ergasias – account for 91% of Greek banking assets. They’ve already been bailed out twice. Their shares are penny stocks. They have two toxic problems: liquidity and solvency. Either one can topple them.

Liquidity is a problem because the Greeks have zero trust in their banks and have been yanking their euros out with increasing desperation. They won’t ever forget what happened to depositors in Cyprus. Deposits have plunged about 20% since November, to €130 billion. According to Reuters, “banking sources” said that just during the first three days of this week, Greeks have pulled €2 billion from their accounts – about €667 million a day, compared to prior weeks when they’d withdrawn €200 to €300 million a day.

Meanwhile, funding from central banks has jumped to over €120 billion: €40 billion from the ECB directly; and €83 billion via the Emergency Liquidity Assistance (ELA) through the Bank of Greece. Thus, deposits and central-bank funding are rapidly approaching a dreadful level: parity.

“There’s a real possibility they’ll fold, not just Greece but the banks themselves,” Fitch Managing Director James Longsdon told CNBC.

And ELA, the lifeblood of Greek banks, is conditioned on two things: available collateral and solvency.

…click on the above link to read the rest of the article…

The Economic Depression In Greece Deepens As Tsipras Prepares To Deliver ‘The Great No’

June 18, 2015

The Economic Depression In Greece Deepens As Tsipras Prepares To Deliver ‘The Great No’

As Greece plunges even deeper into economic chaos, Greek Prime Minister Alexis Tsipras says that his government is prepared to respond to the demands of the EU and the IMF with “the great no” and that his party will accept responsibility for whatever consequences follow. Despite years of intervention from the rest of Europe, Greece is a bigger economic mess today than ever. Greek GDP has shrunk by 26 percent since 2008, the national debt to GDP ratio in Greece is up to a staggering 175 percent, and the unemployment rate is up above 25 percent. Greek stocks are crashing and Greek bond yields are shooting into the stratosphere. Meanwhile, the banking system is essentially on life support at this point. 400 million euros were pulled out of Greek banks on Monday alone. No matter what happens in the coming days, many believe that it is now only a matter of time before capital controls like we saw in Cyprus are imposed.

Over the past several months, there have been endless high level meetings over in Europe regarding this Greek crisis, but none of them have fixed anything. And even Jeroen Dijsselbloem admits that the odds of anything being accomplished during the meeting of eurozone finance ministers on Thursday is “very small”…

Some officials believe Thursday’s meeting of eurozone finance ministers will be perhaps the last chance to stop Greece sliding into default and towards leaving the euro.

However the president of the so-called Eurogroup, Jeroen Dijsselbloem, said the chance of an accord was “very small”.

And it is certainly not just Dijsselbloem that feels this way. At this point pretty much everyone is resigned to the fact that there is not going to be a deal any time soon. The following comes from Reuters…

…click on the above link to read the rest of the article…

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