Bad Bank

The EU Bail-In Directive: Dark Clouds Are Gathering

In principle, the BRRD, or “bail-in directive” as it is also known, is quite a good idea. The fact that lending money to fractionally reserved banks or even merely depositing it with them, involves risks needed to be firmly reestablished. One simply cannot expect that banks and their creditors will be bailed out by taxpayers at every opportunity. Besides, the admission that there are risks in banking that have hitherto been glossed over or have even been lied about was long overdue. However, Europe’s governments are now likely to find out that the current monetary system with its fractionally reserved banks is actually incompatible with this admission, so to speak.

Frontrunning: November 11

  • GOP debate winners and losers (Hill)
  • European Stocks Rise as Dollar Weakens; Metals Decline on China (BBG)
  • Global shares shrug off mixed China data, copper teeters near six-year low (Reuters)
  • Fed's Evans: Looking forward to time when Fed can raise rates (Reuters)
  • Alibaba’s Global Ambitions Face Counterfeit Challenge (WSJ)
  • China Rebalancing Takes Hold as Output Slows, Retail Jumps (BBG)

Deutsche Bank Warns Bonuses Will Be Slashed As Much As 30%

A beleaguered Deutsche Bank is set to slash the investment bank bonus pool by some $566 million as John Cyran's effort to right a sinking ship continues. As Bloomberg reports, "no decision has been taken and the biggest reductions are likely to impact employees in the fixed-income business. Some managing directors may have their entire bonus scrapped, according to the person."

Scandal-Plagued Deutsche Bank Terminates Head Of I-Banking As Part Of Sweeping Restructuring

Moments ago, Europe's largest bank by assets and by gross notional derivatives, announced a raft of high-level management changes as part of an anticipated and sweeping restructuring of key divisions and senior-level committees. As WSJ reports, Colin Fan, the investment-banking co-head responsible for securities trading, will resign effective Monday. But the most profound change is that Deutsche Bank will split its investment bank into two pieces: one, focused on mergers and other deals, corporate finance and transaction banking services such as cash management, and the other on trading and global markets.

Third Time's The Charm? Greece Agrees To Bailout Amid Rampant Skepticism

After what were described as "marathon" negotiations, Greece and its creditors have agreed to the terms of the country’s third bailout program. Although some remain optimistic, the general consensus seems to be that, as Finnish Foreign Minister Timo Soini said over the weekend, "we should just admit that this isn't going to work."

There Is No Exit: Why China's Plunge Protection Is Here To Stay

Update: CHINA TO CONTINUE STABILIZING MARKET, SENTIMENT, PREVENT RISKS, CSRC SAYS

As Beijing pledges to remain supportive amid a harrowing decline in Chinese stocks, China may find itself with no exit strategy for its plunge protection program. As BofAML notes, "An 'indefinite' holding period is certainly possible – it’s how the government had dealt with the last round of bad debts in the banking system, i.e., by shifting them to bad banks and never crystalizing the losses. But even under such a scenario, there may be unintended consequences."

Which Is A Bigger "Act Of Faith" - Owning Gold Or Stocks?

The WSJ has released yet another gold hit piece calling it a "pet rock' and gold bugs "subjects of a laboratory experiment on the psychology of cognitive dissonance" just one day after the PBOC reveals it has added the biggest amount of gold in history in order to "ensure security." But the biggest irony is that none other than Citigroup made a far bolder case that it is not the ownership of gold but of stocks that is the ultimate act of faith: "investors remain united in their faith in the central banks – if not for their ability to create growth, then at least in their ability to push up asset prices. And yet the limits of that faith are increasingly on display." So who is right?

Frontrunning: June 17

  • Greek central bank issues 'Grexit' warning if aid talks fail (Reuters)
  • Kerry says 'patience wearing thin' on Syria's Assad (Reuters)
  • Juncker accuses Athens of misleading Greek people (FT)
  • Al Qaeda kills two Saudis accused of spying for America (Reuters)
  • Hedge-Fund Bet Hits Pensions (WSJ)
  • ‘Flash Crash’ Trader Navinder Sarao Worked With Fund Network Now Under Investigation (WSJ)
  • 'Me? Rich?' U.S. presidential hopefuls play middle-class card (Reuters)
  • You’ve Been Warned: Central Bankers Turning Less Market-Friendly (BBG)