{"id":37825,"date":"2018-09-15T14:36:56","date_gmt":"2018-09-15T19:36:56","guid":{"rendered":"http:\/\/olduvai.ca\/?p=37825"},"modified":"2018-09-15T14:36:56","modified_gmt":"2018-09-15T19:36:56","slug":"state-of-european-banks-the-ecb-view-vs-reality","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=37825","title":{"rendered":"State of European Banks: The ECB View vs Reality"},"content":{"rendered":"
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State of European Banks: The ECB View vs Reality<\/a><\/h3>\n<\/div>\n
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The ECB would like you to believe the European banking system is sound and banks are better regulated. They aren’t.<\/p>\n<\/section>\n<\/div>\n<\/header>\n
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Ten years after Lehman there are numerous statements from bureaucrats, academics, media and others that banks are now better regulated, more solid and liquidity problems vanished.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Reader Lars from Norway Emailed this assessment today.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Price\/Book Ratio<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Deutsche Bank trades at 0.30 on the low side and BNP Paribas at 0.70 on the high side. In between we have Commerzbank at 0.40, Unicredit at 0.50, and Society General at 0.50.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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The verdict is negative.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Target2<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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\u200bItalian and Spanish bank require \u20ac 900 billion in liquidity support on a permanent basis. \u200b<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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This element is mostly ignored by academics and others because they do not understand the implications of Target 2 as a capital flight phenomenon. This is a hidden crisis.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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\u200bThe verdict is negative.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Nonperforming Loans<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Italian banks would all be insolvent if NPLs were to be written off. In order to keep the facade, NPLs are kept on the books as if it’s not a problem.\u200b<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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The verdict is negative.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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\u200bProprietary Trading and Derivatives<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Some of the banks have huge portfolios, led by Deutsche Bank and BNP Paribas. As much as 45% of total assets. \u200b<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Nobody knows what a strict mark-to-market exercise would lead to. Most of the derivatives are interest rate swaps that might suffer should rates rise.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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\u200bThe verdict is negative.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Emerging Market and Troubled Bank Exposure<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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French banks have huge exposures to Italy, and Italian banks have big exposure to Turkey.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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\u200bThe verdict is negative.<\/p>\n

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Contagion Risk<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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We learned from 2008 that interbank markets can freeze. Liquidity is no longer available. How much more than the \u20ac ,400 billion is the eurosystem willing to provide to insolvent Spanish, Italian and Greek banks?<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/article>\n","protected":false},"excerpt":{"rendered":"

State of European Banks: The ECB View vs Reality The ECB would like you to believe the European banking system is sound and banks are better regulated. They aren’t. Ten years after Lehman there are numerous statements from bureaucrats, academics, media and others that banks are now better regulated, more solid and liquidity problems vanished. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[58,233,281,8814,21678,282,14648,13390],"class_list":["post-37825","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-regulations","tag-ecb","tag-europe","tag-european-banks","tag-european-central-ban","tag-european-central-bank","tag-michael-shedlock","tag-mishtalk"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37825","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=37825"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37825\/revisions"}],"predecessor-version":[{"id":37826,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37825\/revisions\/37826"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=37825"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=37825"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=37825"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}