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The True Elephant In The Room Appears: Trillions In Commercial And Industrial Loans To Europe's Insolvent Countries
With the market's attention over the past year exclusively focused on bank holdings of insolvent European sovereign debt, which as is now well known had been declining for months, many if not all forgot that banks also have credit exposure via far simpler conduits: retail and commercial debt. And as an analysis of the full disclosure in the EBA's second stress test exposes, banks are on the hook for literally trillions in various plain-vanilla commercial and retail loans to individuals and businesses. WSJ's David Enrich summarizes it best: "Friday's test results shed light on another potential problem for Europe's banks: huge piles of residential mortgages, small-business loans, corporate debt and commercial real-estate loans to institutions and individuals from ailing countries. As those economies struggle, the odds of rising defaults grow." Oops.
From the WSJ:
Banks tend to be holding far greater quantities of those commercial and retail loans than they are of sovereign debt, according to a Wall Street Journal analysis of disclosures accompanying the stress tests.
This year's stress tests represent the first time there has been a uniform way to measure this exposure. Until now, banks have disclosed their portfolios of loans to customers in troubled countries on a piecemeal basis. That made it virtually impossible to aggregate data across the industry or to compare different institutions.
"The country-by-country exposure [data] is better than any data we've seen before," said Alastair Ryan, a London-based banking analyst with UBS AG. "It's giving me more things to be fearful of," Mr. Ryan added, referring to the disclosures of some banks' large holdings of loans to customers in troubled countries.
After Spanish and Italian banks, France's banks appear to be the most exposed. As of Dec. 31, its four largest banks—BNP Paribas SA, Crédit Agricole SA, BPCE Group and Société Générale SA—were holding a total of nearly €300 billion, or about $425 billion, in loans and other debt issued to institutions and individuals in Portugal, Ireland, Italy, Greece and Spain, the countries that are among Europe's most troubled. That is largely a result of some of the French banks having big retail- and commercial-banking operations in Greece, Italy and Spain.
The French banks' portfolios of commercial and retail loans in those countries dwarf their holdings of sovereign debt.
For example, the four banks have a total of about €51 billion of loans to Spanish customers, according to the Journal's analysis.
Here is how this latest elephant looks like in chart format:
Germany, so far represented as a stalwart of investment prudence (despite its Landsbanken being decimated and on a constant lifeline by the CDO scammery of our own investment banks back in 2005-2006), is among the most impaired:
The dozen German banks that disclosed their stress-test results were exposed to €174 billion of commercial and retail loans to Greek, Irish, Italian, Portuguese and Spanish borrowers as of Dec. 31. They are holding an additional €70 billion of sovereign debt issued by those countries, according to SNL.
More than half of the German banks' loan exposures are concentrated in the country's two biggest lenders, Deutsche Bank AG and Commerzbank AG. Deutsche Bank alone is holding nearly €80 billion of loans in those countries, including €7.5 billion of residential mortgages in Spain. Deutsche, which passed the stress tests with a 6.5% capital ratio under the EBA's worst-case scenario, said Friday that it "feels well prepared" to hit its capital targets.
Naturally, it is no secret that the second Stress Test was nothing but another attempt at redirection:
While the tests did consider the impact of an economic downturn on banks' portfolios of loans and nonsovereign debt in Portugal, Ireland, Italy, Greece and Spain, many critics complained that the tests were overly benign. For example, the EBA's worst-case scenario for Portugal envisioned an 11.6% unemployment rate this year, rising to 12.9% in 2011. The unemployment rate there is currently 12.4%.
The stress-test figures actually understate some banks' holdings of loans in certain troubled countries. That is because the European Banking Authority required banks to disclose their loan holdings in countries only if they represent more than 5% of the bank's total loan exposures.
As a result, some banks opted not to disclose details of their loan portfolios.
Once again, just like in the case of Spain's LaMancha region lying outright about its deficit, "out of left field" discoveries such as this will keep reappearing until the full kit and caboodle of tens of trillions in impaired exposure finally hits the market. Of course, at that point nothing, not even the Fed's unlimited FX swap lines will do much if anything to help.
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Our prayers are with you and your porkish desires.
What, no blessings for us Libertarian boob-strokers? You seem to be too discriminating.
A ridiculous exercise, stress tests are about future scenario's. Let us start with a normal marked to the market practice for their loans so a valuation based on present values. Why bother for stress tests if their current valuations already would show their insolvency?
A ridiculous exercise, stress tests are about future scenario's. Let us start with a normal marked to the market practice for their loans so a valuation based on present values. Why bother for stress tests if their current valuations already would show their insolvency?
At the moment Europe is the focus. When the $1.25 TRILLION debt owed by Australians to foreigners becomes the focus of hedge funds the AUD is going to fall off a cliff.
See ( http://en.wikipedia.org/wiki/List_of_countries_by_external_debt). Australia's foreign debt is worse than that of Italy on a per capita basis.
Australia's foreign debt per capital is even worse than that of the USA. (Or USSA ...United Socialist States of America.)
you get a 60% correction on the AUD in 2008, it then X4 rallies to it's new highs. Australia's housing goes it's bonds will sink. SO yeah HUGE short/PUT trade on the AUD and AUst bonds.
major pain trade due for the aussies
Typical WSJ crap. What is the total worth of COMMERCIAL loans of all US BANKS, ha? I'd bet many many TRILLIONS.
FYI, those retail chains OWN Europe's retail markets, the same way as Wal Mart owns USA retail markets.
ha! german bunds to spanish waste just blew out at 350pb
on the 10yr...that is default ranges!!!
Careful, careful, those figures are nominal aggregates of the institutions that were examined. Over 40% of the German financial system DID NOT participate. That 40% did not participate for a reason, i.e. they would have failed. Imagine what that 40% has on its books - and I mean that literally since you don't have any other choice but to imagine. Nevertheless, what you don't need to imagine is that these "comparative" aggregates are skewed to say the least.
Careful, careful, careful.
The way New York traders and snakeoil businessmen are spewing this crap against Europe, I'd not be surprised if Osama did 9/11 because he was fed up with his New York bullshit spewing brokers. We need more planes! Kill New York!
Fuck all you motherfuckers.
I'm not getting pork.
I'm stuck with shrimp fajitas.
Anyway, so long.
And God bless all you Marxist cocksuckers.
http://geraldcelente.proboards.com
... Loans To Europe's Insolvent Countries. ----- Yeah. By banks and companies in other insolvent countries.
Mirror, mirror on the wall. Who is the most insolvent of them all?
My bet the answer is "The United Socialist States of America (USSA)"
Got to borrow more to solve the problem that they borrowed too much in the past !!? ...Ridiculous
Doh!
Live video: Live video of family washed away
http://gmbpost.com/politics/live-video-a-family-drowned-in-dam-burst/
Let me ask you motherfuckers a question.
What kind of music do you cocksuckers like?
Are you into this kind of shit:
http://www.geraldcelente.proboards.com/index.cgi?board=music&action=display&thread=1379
Anyway, so long for now.
And God bless all you Marxist cocksuckers.
http://geraldcelente.proboards.com
Since you're asking so nicely:
http://www.youtube.com/watch?v=j-HNZLg6ntI
a couple of great treats, you can and should thank me later:
http://www.youtube.com/watch?v=R2ATWZ5qjzk
http://www.youtube.com/watch?v=8pJBunzx12E
Spain is the biggest covered bond market in Europe. Cajas and commercial banks in Spain have issued shitloads of bonds backed by mostly residential mortgages. That was the main instrument in financing the massive housing bubble during last decade. Spanish banks have done "great job" hiding the losses helped by the corrupted establishment. On top of covered bonds there's of course the stinky RMBS-crap. Most of the spanish banks have no access to capital markets anymore so they go to ECB who will accept even old bus tickets as collateral with a smile on their faces. With 20%+ unemployment, massive private sector leverage, declining house prices, non-growing economy etc one just wonders where's the cashflows coming to service all those bonds...
"Five years ago, I was among those who argued that the probability of a collapse of the eurozone was close to zero. Last year, I wrote it was no longer trivial, but small. The odds have risen steadily since, not because of the crisis itself, but the political response. I now would put the odds of a break-up of the eurozone at 50:50. This is not because I doubt the pledge by the European Council to do whatever it takes to save the euro but because I fear it has left things too late."
Wolfgang Münchau
“Last week’s drama over bond auctions in Europe’s third leading economy should convince even the most hardened bureaucrat that the world can no longer let policy responses be shaped by dogma, bureaucratic agenda and expediency.”
“The approach of lending more and more from the official sector to countries that cannot access the market at premium rates of interest is unsustainable. The debts incurred will in large part never be repaid.”
Larry Summers
I'm just happy this money is being spent on quality Europeans rather than poor and elderly Americans >:-|
The Golden Master European Race. :-)
I'm beginning to think this Greece, and other PIIGS, fiasco is a theatre being run with the sole purpose of keeping the eye off the ball of a United States sovereign default, which automatically brings USD out of world reserve currency status. It's either that, or people actually think the banking Families of Europe did not have access to any shadow balance sheet on the continent, and could not forsee the CDS Ponzi imploding, taking their project - the EU & the Euro along with it? Of course not.
Fret not, relatives of little chimpanzees, all will be well. (In a relative way - would major kinetic action triggered by the sovereign domino collapse be an improvement over our current predicament?) ;-)
Soon it will be 7 p.m. in South Korea.
My hand will be wrapped around my pencil-dick as I dream about CNBC Girl Becky.
Fuck all you cocksuckers.
I miss Erin. What happened to her.
Nevertheless, I like the Asian hot Chick who hosts Fast Money.
Anyway, so long for now.
And God bless all you Marxist Cocksuckers.
http://geraldcelente.proboards.com
dax about to go 80 points neg
Its not s surprise at all that Deutsche Bank is so deep in the shit. Deutsche is in principle just the German outlet of Goldman Sachs etc. They are all in the same boat. I wonder whether the German politicians haven given up already on Deutsche Bank as far as the non retail part is concerned. In case of bankruptcy of Deutsche Bank the retail part will continue. There exists already the legislature to make sure the retail part of Deutsche Bank can continue.
As far as Commerzbank is concerned. It is controlled and owned by the German goverment now so no one must worry.its not under capitalized at all. It was a luck for the German government that it had to overtake Commerzbank. Because now for the case Deutsche Bank goes down there exists still one mayor bank in Germany. Deuitsche Bank is serving the interests of wallstreet and the banksters. They are part of it. Mr. Ackermann is a Bilderberg man. Commerzbank is different. Its controlled by the German goverment and has therefore different interests when worst comes to worst.
People forget that private debt is (usually) collateralized. Collateral can be liquidated. Government bonds are not backed by anything other than "good faith".
The risk of corporate loans and yielding nothing in bankruptcy courts in PIGS countries is magnitudes lower than their government bonds defaulting and paying 0 cents on the EURO.
This all just looks like more bailout opportunities. Timmy and Benny now have another excuse to restart the printers.
This all just looks like more bailout opportunities. Timmy and Benny now have another excuse to restart the printers.
Only jubilee will fix this. If the US defaults then I will personally default as well. I will not pay my mortgage or other select bills. What's good for the goose and all...