Spanish Banks In Panic Mode Over Maturity Of ECB's €442 Billion Long-Term Refinancing Operation

Tyler Durden's picture

As the reality of the previously discussed July 1 termination of the ECB's €442 billion LTRO is starting to dawn on Europe (for an extended observation on why this will likely be a very big deal, read here) the weakest financial markets in Europe are starting to panic. Case in point, Spain, where the FT reports local banks are fighting the ECB tooth and nail so their imperatorial nudity is not exposed for all to see: "Spanish banks have been lobbying the European Central Bank to act to
ease the systemic fallout from the expiry of a €442bn ($542bn) funding
programme this week, accusing the central bank of “absurd” behaviour in
not renewing the scheme." The sheer terror at the impending reality of the liquidity crunch is captured nowhere better than in the words of this bank official: "Any central bank has to have the obligation to supply liquidity. But
this is not the policy of the ECB. We are fighting them every day on
this. It’s absurd." Keep in mind that traditionally cheery and optimistic Erik Nielsen is also very much concerned about the roll off of the LTRO and how it will impact European banks. Hold on to your hats folks: July is going to be fun.

From the FT:

Banks across the eurozone, but in Spain in particular, have found it hard in recent weeks to secure liquid funding in the commercial markets, with inter-bank funding virtually non-existent.

The €442bn ECB facility, which charges interest at a rate of 1 per cent, is not set to be renewed, something that banks in Spain and elsewhere in Europe say ignores current commercial realities.

A special offer of six-day liquidity will tide banks over until the following week’s regular offer of seven-day funds. On Wednesday, the ECB will also be offering unlimited three month liquidity, and further offers of three-month liquidity will keep banks going until at least the end of the year.

A certain side-effect, even assuming the LTRO maturity occurs without major blow ups, is the imminent collapse in the lending pool across all of Europe:

BarCap estimates that at least €150bn of the ECB funding that is
maturing will not be rolled over into shorter-term three-month schemes,
forcing banks to shrink their own lending.

The reasons the ECB is wary of pursuing the same policies as encouraged by our own Fed's irresponsible "infinite liquidity" approach, are virtually the same as those presented earlier today by the BIS.

ECB policymakers worry that providing cheap loans for such a long
period distort markets and could restrict the room for manoeuvre in
monetary policy.

As for summarizing just how bad the European (and global) situation really is, none does it better than BarCap analyst Simon Samuels: "The system is just not working. We’re approaching the third year of
liquidity support and still the market cannot survive unaided."

h/t London Dude Trader

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peripatetic86's picture

Those junkies always get so pissy when you try and cut them off.   Happens every time.

Ragnarok's picture

When do the cold sweats and the profuse vomiting begin? We're gonna need a really big methadone clinic.

LeBalance's picture

Do you not see them between the lines in the quotes of the article?

Ragnarok's picture

Cold sweats yes, vomiting not yet..... waiting...

Cognitive Dissonance's picture

It's so beyond just the sweats and vomiting. What's around the corner, which is what's really frightening the powers-that-be, is Delirium Tremens.

"Withdrawal from sedative-hypnotics other than alcohol, such as benzodiazepines or barbiturates (edit by CD- OR FIAT CURENCY) can also result in seizures, DT and death if not properly managed.

Withdrawal from other drugs which are not sedative-hypnotics, such as opioids, marijuana, cocaine etc. do not have major medical complications and withdrawal is therefore not life threatening.[4] When caused by alcohol, it occurs only in individuals with a history of alcoholism. Occurrence of a similar syndrome due to benzodiazepines does not require as long a period of consistent intake of such drugs. Prior use of both benzodiazepines and alcohol can compound the symptoms and is the most dangerous, especially if untreated."

Cheeky Bastard's picture

HEY HEY !!!! Goddammit CD; dont talk shit about barbiturates !! ><

Amish Hacker's picture

Give me Librium or give me meth...

Cognitive Dissonance's picture

Now that's a clever turn of a phrase. Bravo!!!!

Cognitive Dissonance's picture

"HEY HEY !!!! Goddammit CD; dont talk shit about barbiturates !! ><"

Hi Cheeky. Some of my best trips were on the hydrocodone highway. :>)

And I suspect some here on ZH believe my 5 part series on our collective insanity was one long Derilium Tremen on my part and they're all now waiting for my death. :>)

mikla's picture

It's the weirdest thing.  When you loan them money, they assume they can borrow more money from you to make payments on what they owe you.  And, yes, they are pissed when they find out your pockets are empty.  How could you have empty pockets!  You Monster!

peripatetic86's picture

Exactly.  It is funny how you always end up being the bad guy.  

DosZap's picture

Timmay????, Is that you???

Rusty_Shackleford's picture

Thank God the US doesn't have any spies trying to "influence policy decisions" in any foreign countries.

Ragnarok's picture

Like building a super base next to your seat of government?

DosZap's picture


what do you think 75-80% of U N Delegates,and staff are?(I mean besides FREELOADERS).

Mitchman's picture

Liquidity squeeze.  Coming to a U.S. company that relies on European banks.

Invisible Hand's picture

I hate to be completely self-absorbed, but could we postpone the end of the world until after the sale of my home closes (mid-July)?

Would it "foil some vast eternal plan if I was a wealthy man?"

Just kidding, closing on the house doesn't really matter a lot, except I hate to have a depreciating asset that I am not getting any benefit from (we moved for a job).


peripatetic86's picture

Congratulations on a finding a greater fool.  You are getting out just in time.

walküre's picture

you were able to sell your house and .. with some equity at the end of the deal?

dude, you're causing the liquidity crunch. what if we all did that and syphoned off these vast amounts of liquidity. what are we talking here? $10,000 or $50,000 in hard cold cash assets?

you know what would be worse for the system.. if people like you took that equity cash and bought GOLD instead of another house!


faustian bargain's picture

Or just paid cash for a homestead with acreage, no financing.

DoChenRollingBearing's picture

You all know my love for PMs...

But, I like holding LOTS of FRNs in units of 100 too!  If we get real deflation, I'm going shopping!

Ripped Chunk's picture

Hope you have a solid buyer/borrower???

If the buyer's loan has not gone to underwriting yet I wouldn't count on anything.  Yes it is that bad.

LeBalance's picture

4th Fireworks? Jawohl!

MrTrader's picture

Pretts uninformed analyst at BarCap. Who is this guy ? Freshman ?

As his colleague tells the Financial Times :


Which is also suggested by European access to the US commercial paper market, according to BarCap’s Joseph Abate. This was another mini-crisis to watch in spring, after steep falls in buying of foreign banks’ paper in response to debt fears, plus some regulatory changes in money funds’ holdings.

As Abate notes, banks have discovered a workaround:

Continental European banks are not locked out of the dollar commercial paper market – although they might struggle to access it… To cope with the more difficult environment, these banks have begun offering 7-day putable securities with final maturities of 6m or 1y. Issuance of putable paper has totalled more than $15bn over the past two weeks…

Assuming the put is not exercised the Continental banks now have access to term money which previously was unobtainable. Likewise the paper meets the 7-day liquidity requirements imposed on money funds by the SEC and it limits counterparty credit risk to just a week for nervous investors.

That would have to be quite some nervousness. Not that all puts are apparently so short, though. A large Spanish bank, Abate says, has managed to issue paper with a one-month put.

Lucky them. We’d love to know whom....

dantes1807's picture

You would think with Greek CDS soaring, the market would have sold off today. One thing I have seen is that sometimes the market acts in a delayed fashion. Let's not be surprised to see Dow 10,000 broken in coming days in a hard way after a few false breaks.

Lux Fiat's picture

There was a disconnect between the 10 yr and the SP-500 and DJ-30 most of the day.  After seeing this "breaking news" headline on a piss-poor excuse of a financial news site, market is likely on borrowed time..."Stock Values Are 'Better Now,' Big Rally On the Way: [AJ] Cohen"

hambone's picture

I had to go read it myself.  "the worst is priced in"???.  And it really is the lead story on CNBC page recounting an interview from June 9?

WTF LOL :)  Friends, this week may be the 2nd half kickoff of our financial meltdown we have been expecting.  Grab the popcorn.

NumberNone's picture

"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929

Love those economists and their PhD's!!!

cswjr's picture

Fisher ultimately recognized the error of his views (and predominant error of Classical macroeconomics in general) and proffered the concept of Fisherian debt-deflation -- something that is very much applicable today.  I realize that you're being sarcastic, but don't put everyone in the same boat; just because some of the FRB economists are myopic and not particularly prone to introspection doesn't mean that they all are. 

papaswamp's picture

Soon as the run on banks begin, the basque seperatists will kick up some activity to cause further destabilization...

buzzsaw99's picture

No problemo. They gots jon clawed on speed dial.

dan22's picture

The Coming Euro Collapse- Germany and France examine 'two-tier' euro

A European official has told The Daily Telegraph the dramatic option was being examined at cabinet level.

Senior politicians believe their economies need to be better protected as they could not cope with another crisis on a par the one in Greece. View from the lab: continental driftThe creation of a "super-euro" zone would initially include France, Germany, Holland, Austria, Denmark and Finland.

The likes of Greece, Spain, Italy, Portugal and even Ireland would be left in a larger rump mostly Mediterranean grouping.The official said French and German officials had first spent months examining how to exclude poor-performing states from the euro but decided it was not feasible. A two-tier monetary system in the 16-member euro zone is being examined as a "plan B".

"The philosophy is the stronger countries might need to move away from countries they can't afford to bail-out," said the official. " As a way of containing the damage, they may have to do something dramatic, though obviously in the short term implementation is difficult.

Eternal Student's picture

Two-tier Euro - is that like Two-ply Charmin?

Or perhaps, one is worth the equivalent of toilet paper, and the other isn't worth even that?

DosZap's picture


Yes, I posted a link to this last week.........

Germany & France, have been the ringleaders......

They want a Euro North, Euro South.............

IOW, they have no intentions of bailing the South Med folks out again.

London Dude Trader's picture

FWIW Denmark is not part of the Eurozone and it has its own currency, the Danish krone. 

MrTrader's picture

@London Dude Trader : Funny, how many ZH readers don´t even know about basic European wonder 37 % US of hedge fund employes could not answer the question into how many sovereign, independent countries the former Yugoslavia was splitting...I guess for 90 % of the US population the Russian Federation is still congruent with USSR... 

JLee2027's picture

I have no idea about Yugoslavia and could care less.  We don't fawn over old Europe in this country, although old Europe fawns over the USA. 

PeterB's picture

Than you have no idea as to the origin of the last two world wars. I hope you can pay attention to the beginnings of a possible third world war & its origins more carefully.

JLee2027's picture

Your statement is ridiculous. Don't reply to me again, thank you

Rotwang's picture

gyldigt betalingsmiddel

You could find out what actually is or isn't. The Swedish series from 1873 onwards is "giltigt betalningsmedel" in Sweden. (have an email from the Riksbank)


Would expect similar conditions to exist in Denmark. "Dane land"


RockyR's picture

get real.  they aren't going to withdraw any critical funding facilities this week, especially not if doing so would have the dire consequences you describe.

buzlightening's picture

We  know piigs get slaughtered!  What I know is 46 states need to fill budget gaps.  Some of them by law 7/1!  Flash crash 5/6 which initiated fresh new breaker boxes installed for low Summer vol!!  Extremely hard for BK'd states to get liquid going to where one always goes for cash; the markets!! When low vol and new curbs have been put in too timely to be a coincidence!!  The lawless banksters protected again!!  I see said the blind man!!