Italy is scrambling to secure a privately-backed bailout of Monte dei Paschi di Siena, the most exposed of the country’s troubled lenders, including a plan to raise €5bn of fresh capital so as to avert nationalisation, the FT reports. The bank needs to obtain some €5 bilion in capital ahead of Friday's stress test, or else a dire "contagion" scenario could unfold that could impair not only all Italian banks, but promptly spread first to France and then to Germany...
A historic event took place moments ago when Mark Johnson, the global head of cash FX at HSBC was arrested at JFK airport for his role in a "conspiracy to rig currency benchmarks", and specifically for frontrunning customer orders. He is the first person charged by the US in the ongoing FX rigging probe.
It has been a while since investors focused their attention on the world's "most systematically risky" bank, Deutsche Bank. Moments ago, S&P made sure to remind us that nothing is fixed, when it released a report saying that "Operating Conditions May Challenge Strategy Execution" but keeping the bank at a BBB+ rating.
Helicopter policies are not advocated in ‘a normal world’. They are however almost inevitable in the next recession. "Japan will be the flag bearer of fiscal stimulus.” Which will be sufficient to breath some inflationary spirit into the system. “But this is all febrile and can get over-turned by the slightest change in wind direction,” he said, tentative. “This will be the little inflation before the big helicopter-driven inflation.” But that will first require a crisis.
JPMorgan has been appointed by the Italian government to work on plans to set up a bank to buy troubled loans from the country’s lenders at approximately 20% of face value. The gross notional size of Italy's Bad Bank #2 would be €50 billion. As part of JPM's plan, the government would acquire some of the bad loans at a price of 20 cents in the euro.
On the surface, things seem pretty quiet in mid-July 2016. But underneath the surface, it is a very different story. As you will see below, the conditions for a “perfect storm” are coming together very rapidly, and the rest of 2016 promises to be much more chaotic than what we have seen so far.
Wells' long overdue admission that it is woefully under-reserved for what may be a deluge of loan defaults should oil fail to rebound strongly... and certainly if oil continues to decline, has finally arrived in the form of this chart showing its LTM loan loss provision expense. It is, in a word, soaring.
The banking crisis of 2008 never fully healed. It just got shuffled under the carpet while the public was fed a phony narrative that everything is fantastic. This turned out to be a gigantic farce; many of the world’s banking systems are just as risky as they were back in 2008.
As we noted yesterday, in his latest webcast to DoubleLine investors, Jeff Gundlach confirmed the key points from his weekend Barrons which summarized his outlook that "things will get worse in the future, not better." But while Gundlach's skeptical bent has been well-known, we also learned that Gundlach has been actively adding to shorts as the market breaks out to new record highs. Cited by Reuters, the new bond king said that there is "big money" to be made on the "short side."
Contagion is the reason Italy’s banking crisis is all of a sudden Europe’s biggest existential threat. Greece’s intractable problems are out of sight, out of mind; Brexit momentarily spooked investors and bankers; but Italy’s banking woes have the potential to wipe out investors and undo over 60 years of supranational state-building in Europe.