As Euro Banks Return €137 Billion In Cash, Moody's Warns "European Banks Need More Cash"

Tyler Durden's picture

Europe has now officially become the Schrodinger continent, demanding both sides of the economic coin so to speak, and is stuck between the proverbial rock and hard place (or "a cake and eating it"). On one hand it wants to telegraph its financial system is getting stronger, and doesn't need trillions in implicit and explicit ECB backstops, on the other it needs a liquidity buffer against an economy that, especially in the periphary, is rapidly deteriorating (Spanish bad debt just hit a new all time high while Italian bad loans rose by 16.7% in one year as more and more assets become impaired). On one hand it wants a strong currency to avoid any doubt that there is redenomination risk, on the other it desperately needs a weak currency to spur exports out of the Eurozone (as Spain showed when the EUR plunged in 2012, however that weak currency is now a distant memory and it is now seriously weighing on exports). On the one hand Europe wants to show its banks have solidarity with one another and will support each other, on the other those banks that are in a stronger position can't wait to shed the stigma of being associated with the weak banks (in this case by accepting LTRO bailouts).

It is the latest that is the most glaring dichotomy because as reported earlier, while some 278 banks, or about half of the original LTRO participants, voluntarily paid back some €137 billion to the ECB, it is none other than Moody's warning that European banks, especially those in the periphery, will need much more cash.

From Reuters:

Banks in Spain, Italy, Ireland and Britain need to set aside much more money to cover potentially bad loans, credit ratings agency Moody's said on Thursday, meaning European taxpayers may again be tapped for cash.


European banks have already raised hundreds of billions of euros to cover possible losses from loans that soured in property and financial market crises. Much of the funding has come from governments.


"We believe that many banks, in particular in Spain, Italy, Ireland, and the UK, require material amounts of additional provisions to fully clean up their balance sheets," Moody's said in its global banking outlook for 2013.


"Some banks have in recent years delayed full recognition of embedded loan losses, partly by restructuring loans," the report added. "This strategy of buying time (often tolerated by regulators) limits a bank's capacity for new lending and poses risks for creditors of European banks."


Moody's did not say how much extra money banks would need.

In this case Moody's is spot on, and what Europe certainly does not need, is giving the impression that the ECB is implicitly tightening, which is how the market is interpreting today's action and Nomura has already raising its forecast for total H1 LTRO repayment to €350 billion. Recall from Deutsche Bank:

However the market will likely continue to have some focus on the fact that the ECB balance sheet is likely to be steadily shrinking for a period at a time when the Fed is effectively increasing its by $85bn/month and where Japan is seen by many to be set to notably increase its interventions. So  while the repayments are not a big deal in themselves the contrast between the ECB and many other central banks means that the Euro is probably biased to appreciate for the foreseeable future. This might provide an unwelcome headwind for growth in Europe later in the year. Despite the promise of the OMT, Europe is in danger as being seen as the least active in the near-term in the currency war skirmishes that are focusing investors minds at the moment. Maybe actions elsewhere and a higher Euro will eventually lead to the ECB balance sheet expanding again after some market stress but this is further down the road.

So what just happened in Europe? Well, remember when Jean Claude Trichet hiked rates in the middle of 2011 to, that's right, prove that Europe is fixed (and when inflation was rampant - everyone remember what happened next.

As for Europe's banks needing cash - they sure do, maybe not right now in this latest momentary monetary lull, but soon once it becomes clear that nothing has changed and that simply injecting even more liquidity into the market does nothing for actual capital quality, we will all be backt so quare one.

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bigbwana's picture

The documentrary THRIVE exposes the Banks and their evil quest for a NWO. Never happen. Thank God!

Joe Davola's picture

The Axis powers should have trademarked New World Order, the royalties would be welcomed in Italy and Japan these days.

MiltonFriedmansNightmare's picture

The first thing we do, let's kill al the bankers.

Tsar Pointless's picture

Well, Don Henley and The Eagles said we should kill all the lawyers - kill them tonight - back in 1994.

I would agree with both you and Don, though.

francis_sawyer's picture

Well let's think that one over for a minute... If [as it appears on the surface], most of the top echelon of "bankers" are jewish, wouldn't that represent a sort of holocaust?... I'm not smart enough to understand the ramifications...

In that context, the statement should therefore be revised to "Let's kill all non-jewish bankers"... Yeah ~ that ought to have a profound impact on things...


Footnote: francis_sawyer isn't suggesting anything here [either way]... I'm simply trying to 'illustrate' how REALITY is a very different script versus what people WANT TO BELIEVE or delude themselves into thinking...

are we there yet's picture

Well .... God keeps loosing his court cases because satin has all the lawyers.

AgAu_man's picture

Don Henley plagiarized -- or is it now "leveraged"? -- Napoleon. 

And... "The guy to get the patent is the last guy to have invented 'whatever'".  -AgAu_man

LongSoupLine's picture

Switching to downstream from upstream in a boat full of fucking holes is not going to solve the sinking problem. Fuck you Draghi, fucking Goldman ass eating crook.

And a huge fuck you Moody's...fucking doing analysis on the boat you fucking put many of the holes in. Complicit fucking assholes.

fonzannoon's picture

Breaking news Moody's barred from rating All European bank debt for 2 years?

GetZeeGold's picture



You can skirt the NCAA rules a tad....but don't mess with the ECB.

smacker's picture

Dunno if that's true and where you got it from. But if true, it wouldn't surprise me one jot. The EU apparatchiks made it clear some while ago they don't like the ratings agencies (I wonder why) and intend to create their own. I expect they'll only be allowed to use AAA ratings for EZ banks. We now live in the world of truth and make-believe truth.

Dr. Engali's picture

Shut the fuck up Moody's! When you actually do some legitimate work and downgrade the U.S to the junk that it is,  maybe I'll take what you say a little more seriously. Until you do that you're nothing but a fucking bought and paid for joke.

caimen garou's picture

you will have to get a wrecker truck to pull moodys out of bernakes ass before they will do any real work!

fonzannoon's picture

Ray! The language Ray!

sorry just trying to add some levity.

This is the part of the play where they let  the ratings agencies say something logical so the seeking alpha dumbfucks scratch their beards and pensively consider which US equities make sense in these rough waters.

Dr. Engali's picture

LOL....Ray never grows old.

I was thinking the same thing....It's so damn exasperating, four years of this and we are at the same darn place. I've been through this so many times I feel like I've run out of things to say, and I just keep repeating myself.

viahj's picture

i've found that polishing my metals (both pms and tactical) greatly reduces my frustration at the ongoing fraud.

PaperBear's picture

Gold Bank Run Accelerating…Now the Swiss Want Their Gold Back- All 1040 Tons of It!

Are the Swiss going to be told to stretch the repatriation over 7 years ?

new game's picture


this very big news

swiss is a place where the people actually govern.

10k signatures and it will happen.

and we all know as the scramble for phys gold goes on



stack up while the paper gold hold down da price...

same with silver

wow, planning for the future is so eassy!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Stuntgirl's picture

Ghana as well...

Butbutbut look at that gold price in Euros PLUNGING!

I'm about to repatriate me some in 3, 2, 1...

AgAu_man's picture

Time to save one's privates and repatriate one's private Paper-Gold is? -- Yoda

HoaX's picture

Two words; Fuck Moody´s

Ghordius's picture

"some 278 banks, or about half of the original LTRO participants, voluntarily paid back some €137 billion to the ECB"

so what's next? TARP and TALP partecipants pay back - in full?

hahahahahahahahahaha - trust the (damn, great and gifted) Tylers to find whatever the eurozone players do "stoopid", particularly when it comes to tighten supply, rising rates etc, etc.

btw "Schrödinger's cat" is very, very apt. It actually defines a fiat currency. something intrinsically worthless and at the same time functionally useful in economic interactions

knukles's picture

Your Zen for the Day:

On the one hand we have a (fill in your choice) and on the other hand we have four fingers and a thumb.


BandGap's picture

There are solutions to the Schrodinger Equation. You just have to define the variables.

So, why would anyone want to predict (it is a probability function, after all) what is essentially chaos? Moody's knows that their statement is the complete opposite of the actual event of the banks giving money back. So, why would a ratings agency state the exact opposite of what is transpiring as a solution to the problem?

Either chaos is the goal or institutions are carving out their individual stances knowing full well what is going to eventually happen. Then again, even Moody's can't overlook the obvious. The history books in 50 years are going to be very interesting.

Eugend66's picture

Uhh .. , still the sweetest thread title ever seen. :-)

GetZeeGold's picture



It's the entire one title.

Bold Eagle's picture

Watch rising EUR to crash the remaining healthy economy - Germany. Just like the last time when ECB decided to raise rates in July of 2011.

Racer's picture

And the Dax not far off all time highs with the euro on a tear?

Stuntgirl's picture

And price of gold in Eur way down?

Silvertrader's picture

Maybe it is time to short the banks again. It can give nice returns if you trade with leverage!

yogibear's picture

After Egan, the rest of the US credit rating agencies have been put on notice from the justice department. 

The US is now free to spend and load up the infinite credit card all they want without any fear of warnings.

 The economic warning lamps of the cockpit have been removed you are now safe to fly.

ebworthen's picture

So is the SEC going to go after Moody's the way they did Egan-Jones?

Or, will the SEC let Moody's slide as long as they guarantee AAA for the U.S. in perpetuity?

Dareconomics's picture

Since the msm thinks that repaying the loans is a sign of strength, there is an incentive to repay the loans to spin perception. Of course, the banks still need to do a lot of deleveraging:

S.N.A.F.U.'s picture

This whole "have to increase exports" meme is just a bullshit excuse that placates the stupid masses so governments can spend more money, go into greater debt, and give more money to the banks.  If they really just wanted to increase exports with newly printed money, they would use all of that money to fund a negative export tariff (aka subsidize exports).

(Not that I'm suggesting subsidizing exports is a good idea.)

deebee's picture

UPDATE: European Banks have decided to accept used Schtickies and Shamwows, in place of cash, to be used as collateral for further loans.