European Bank Run Watch: Swiss Edition

Reggie Middleton's picture

On July 23, 2011 I penned The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs! which
detailed for my readers and subscribers the mechanics of the modern day
bank run, particular as I see (saw) it occurring in Europe.

image015 image015

Those that follow me know that I have been warning on Europe and its banking system years before the sell side and mainstream financial media (reference the Pan-European Sovereign Debt Crisis series).

 A reader has convinced me to consult with him on a specific
situation, regarding overseas monies and the (lack of) safety of those funds, which prompted me to dig up the Sovereign Contagion Model that
we developed n 2010. In a nutshell, the Swiss banking industry was
built upon impenetrable bank privacy for high net worth clients. Once
the US decided it needed to boost its tax revenues during hard times, it
literally collapse the Swiss hegemony in secret banking and left that
banking industry to compete in actual banking versus asset concealment.
This left Swiss banks naked, for they don't appear to me to truly be
able to compete aggressively and successfully in other areas. 

Add to this mix potential contagion issues for the Swiss banking
industry due to the fact that Switzerland has a veritable cornucopia of
exposure all over the soon (if not already) serial recession ridden
world, and well...

The first chart is raw contagion exposure as a % of GDP. The 2nd chart is the same exposure ran through our “reality” model. Food for thought.

The BoomBustBlog Sovereign Contagion Model

Nearly every MSM analysts roundup attempts to speculate on who may be
next in the contagion. We believe we can provide the road map, and to
date we have been quite accurate. Most analysis looks at gross claims
between countries, which of course can be very illuminating, but also
tends to leave out many salient points and important risks/exposures.

Description: foreign claims of PIIGSDescription: foreign claims of PIIGSforeign claims of PIIGSforeign claims of PIIGS

In order to derive more meaningful conclusions about the risk
emanating from the cross border exposures, it is essential to closely
scrutinize the geographical break down of the total exposure as well as
the level of risk surrounding each component. We have therefore
developed a Sovereign Contagion model which aims to quantify the amount
of risk weighted foreign claims and contingent exposure for major
developed countries including major European countries, the US, Japan
and Asia major.

image002 copyimage002 copy

I.          Summary of the methodology

·         We have followed a bottom-up approach wherein we have first
identified the countries/regions with high financial risk either owing
to rising sovereign risk (ballooning government debt
and fiscal deficit) or structural issues including remnants from the
asset bubble collapse, declining GDP, rising unemployment, current
account deficits, etc. For the purpose of our analysis, we have selected
PIIGS, CEE, Middle East (UAE and Kuwait), China and closely related
countries (Korea and Malaysia), the US and UK as the trigger points of
the financial risk dissemination across the analysed developed

·         In order to quantify the financial risk emanating in the
selected regions (trigger points), we looked into the probability of the
risk event happening due to three factors - a) government default b)
private sector default c) social unrest. The probabilities for each
factor were arrived on the basis of a number of variables determining
the relative weakness of the country. The aggregate risk event
probability for each country (trigger point) is the average of the risk
event probability due to the three factors.

·         Foreign claims of the developed countries against the
trigger point countries were taken as the relevant exposure. The
exposures of each developed country were expressed as % of its
respective GDP in order to build a relative scale for inter-country

·         The risk event probability of the trigger point countries
was multiplied by the respective exposure of the developed countries to
arrive at the total risk weighted exposure of each developed country.

·         Description: File Icon Sovereign Contagion Model - Retail - contains introduction, methodology summary, and findings

·         Description: File Icon Sovereign Contagion Model - Pro & Institutional -
contains all of the above as well as a very detailed methodology map
that explains what went into the model across dozens of countries.

The bank run in other European nations:


Related Pan-European Sovereign Risk Non-bank Subscription Research Archives

·         Ireland public finances projections_040710

·         Spain public finances projections_033010

·         UK Public Finances March 2010

·         Italy public finances projection

·         Greece Public Finances Projections

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JenniferS's picture


The EU and the Euro are 'busted flushes'. It is only a matter of time before people finally wake up to the anti-democratic nature of the whole thing. The Greeks are frightened of the Germans, with good reason. Any new government formed out of the mess of the recent election will get nowhere with the Germans and are doomed to a life of excruciating poverty and constant need in additional fast pay day loans. It could well end in a military takeover - something the Germans would no doubt welcome.
eatapeach's picture

"...Watch: Swiss..." I like that

LMAOLORI's picture



A New Run On The Banks? Spaniards Pulling Cash Out At Record Rates

godzila's picture

Reggie - what is your point ? Is there anything new here that I fail to comprehend (except that the global fanancial system is a huge mess) ?

My Days Are Getting Fewer's picture



you are smart guy.  But why not do yourself and all of us a favor:


Pen an "executive summary" in less than 50 words and stick it on top of the article.  Then, let the rest flow for those (not me) smart enough to figure out what you are saying.

q99x2's picture

On July 23, 2011 I penned

I was likely bitten by an inferiority complex early in my life.

Ar-Pharazôn's picture

hahahahahaha................... swiss banks are the evil right?


what about Delaware................ mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm


regards a swiss citizien

andia's picture

Reggie puts everybody into one sack and when the storm hits he releases few of them out and  claims he was right.

working class dog's picture

I sat on a plane next to a retired banker, he told me push the risk off. Reggie your solution of more credit default swaps and the filthy business that Yukelee boy Buffet and GE partake in, is riddled with land mines. How about this for a soulution, forget dumping off the risk, do proper due diligence and if you want to lever up fine, but use your own money , if you went back to a reality check of real mark to market model instead of mark to fantasy the system will clear out. This will happen anyway,, just like Hank the Stank Paulsons bullishit tarp hold up, the people are getting hosed anyway. Let the scumbags burn in their own shit. Sorry for the graphics, but I am a sheeple and resent having austerity forced on me so some hockey puck can have an extra home in the hamptons, and loot my pension, by the way I am a prviate industry worker.

Zero Govt's picture

"..Swiss hegemony in secret banking and left that banking industry to compete in actual banking versus asset concealment."


Er, is nobody allowed privacy in your idealised collectivist world Reggie?

You've stated on your blog anyones (private) data once online is "shared" and good-to-go. Which is of course the abusive business model of your beloved Google who sucks peoples data and surfing without their permission, corporate spying made a bland everyday reality rubber stamped by Reggie

What part of Swiss Banking wants to compete with Wall Streets competitive edge in global fraud/cooking Govt books, flogging garbage IPO's and mortgages as 5 star rated glam, debt-slave student loans and debt-slave Govt's etc etc 

big Swiss Banks are in as much trouble as Big US banks ...'Big' everything is in trouble because Big doesn't work at any level let's chase down the little guys as per US Govt vandlaising the Swiss Banking industry to thieve even more. That'll fix it

DavidPierre's picture



My inside guy, the friend of a MS fund manager appears to be growing in validity and intensity.

Morgan Stanley is the next failure.

Rick Wiles of TruNews is a Hat Trick Letter subscriber and sharp fellow.
He has his own contacts spread out over the financial community.

Morgan Stanley is going to the slaughterhouse, not the altar.

The part these guys miss is that MS has perhaps a few hundred thousand stock brokerage accounts.
MS merged with Dean Witter and Smith Barney to become the premier stock house.

MS has 200k stock accounts, maybe 300k or more.




Imagine the hue and cry from the ignorant sheeple masses who call us conspiracy nutballs.
When their stock accounts and IRAs vaporize in re-hypothecation made legal.

Just my 8 cents.



Paracelsus's picture

Always wondered if the IRS thing was about money-laundering for drug lords in South America. I suspect the Yanks threatened to take the Swiss banks behind the woodshed,i.e.,banned from US operations for ten years ,etc.

andrewp111's picture

UBS got too brazen and was selling and operating its asset concealment schemes on US Territory.  Once the IRS got a hook into them it will never let go.  The IRS has been wanting to bust them for decades, and once they got their chance, they grabbed on and bit down like a pit bull.

otto skorzeny's picture

will the IRS "overlook" all the CIA, DEA, US elected reps, etc hidden bank accounts in Switzerland? mmm... guessing yes.

SwingForce's picture


OOOps, I forget the Chest Thumping........

Dan Conway's picture


I think this is good analysis and the full report is right.  However, my simple rule of thumb is that all banks, regardless of nationality and currency, are insolvent and should be avoided with my money.  If you could draw a diagram of all of the relationships and interdependecies of these banks (and central banks) it would look like a bowl of spagetti; therefore, if one goes under they will all go under. 


ebworthen's picture

So Reggie, are the Cayman islands and other tropical bank destinations not suffering the "Swiss Syndrome" of bowing low to the I.R.S.?

And...why did the Swiss Banks cave to the U.S. Internal Revenue Service?

I imagine on a level field competing with Goldman Slacks and J.P. Morgue would be challenging as they are the "home team" of the Ponzi.

walküre's picture

And...why did the Swiss Banks cave to the U.S. Internal Revenue Service?

Why did the Swiss Banks take Nazi gold and other assets all the while claiming their "neutrality" when surrounded by German Wehrmacht and Luftwaffe from every angle?

I think the Rothschilds made their beds in Switzerland early on...

andrewp111's picture

The big Swiss banks have BIG branches in the USA. They do hundreds of billions worth of legitimate business. They aren't like Cayman banks where an American has to risk taking a brown paper bag filled with cash on a plane or cruise ship to get there.

Robslob's picture

Knowing how the dominos fall is the key to being the final domino to fail..ahem...fall.

hannah's picture

"A reader has convinced me to consult with him on a specific
situation, regarding overseas monies and the (lack of) safety of those funds, which prompted me to dig up the Sovereign Contagion Model that
we developed n 2010. "....


so the whole article is just 'the european banks are fucked' story....and you need a model for that...?

Lokking4AnEdge's picture

Reggie-any news on "PEI" ? Looks like they managed to re-finance and the stock is shooting up almost daily...


madcows's picture

Forget hunger games and running man.  I want banker on banker thunder dome.  Last banker standing wins.

Dan Conway's picture

Must watch TV! 

Even better: winner to face off against welfare battle royale winner.

Sir Edge's picture

Two Bankers Enter... No Bankers Leave... :o)

Nuanda's picture

Reggie seems like a smart guy on Keiser but these posts are the most dis-jointed unedited brain-farts I've ever seen.  The only takeaway I can see is the headline and the constant "told you so" from the author.  The rest is an indeciphrable mish-mash.  Is it just me?

brunoaa's picture

Absolutely agree. Reggie's analysis are spot on but the stuff he writes is almost impossible to decipher (on top of the annoying I told you so....). Seems like a 5 years ols kid.... I subscribed to his service but stopped, could not make anything out of it. A pity.

Popo's picture

It's not just you.  Reggie is amazingly accurate with a huge number of predictions.  But his presentations have always been a bit junior-varsity.  

He needs an intern.  Reggie, I suggest a 22 year old with a great rack and a knack for photoshop -- among other things.

jeff montanye's picture

and a real facility for imperfect verbs.  reggie is hard working and insightful, a testament, i think, to meritocracy, but he didn't learn the king's english in short pants.  

Popo's picture

 Switzerland's banks going tits-up would mark the beginning of the "bank-eat-bank" phase of the global implosion.   

(Which is the phase just before the "mushroom-cloud" phase)

Ratscam's picture

UBS and Credit Suisse are selling their prime real estate in Zurich.
This fact speaks for itself.

hardcleareye's picture

Reggie, Thank you, enjoyed the read.