Euro-Land Banks In Trouble

Tyler Durden's picture


Via Pater Tenebrarum of Acting-Man blog,

A Record Amount of Bad Loans

A recent study by Ernst & Young has revealed that euro-land banks in the aggregate now hold € 918 billion ($1.23 trn.) in non-performing loans (7.6% of all loans outstanding). E&Y sees about 15.5% of all loans in Spain and 10.2% of all loans in Italy as likely to be in NPL status (this exceeds the most recent official numbers somewhat).

In light of such staggering numbers, the idea to use the ESM for direct bank recapitalization seems somewhat ambitious. This is especially so as the idea to employ the ESM to take over the costs of already bailed out banks is being pushed by a number of euro area members. No doubt Ireland and Spain would be happy to see that (in fact, Spain is already the 'exception' as the ESM is potentially on the hook for € 100 billion for its banks – but this is structured as a loan to Spain's government, not a direct bank bailout).

The problem is that if the ESM wants to retain its AAA rating, it will have to back any financing it obtains from the markets with far higher guarantees if it rescues banks rather than governments. Given that what has been pumped into ailing euro-zone banks to date already amounts to €300 billion,  its official capacity could be quickly exceeded if these existing bailout commitments were taken over by it.



bank rescue

Taxpayer-funded bank rescues in the euro area so far – the total already amounts to €300 billion, and that is not counting what might be used to bail out Cypriot banks and what may still be required in Italy and Spain (chart via Die Welt).

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Fri, 02/15/2013 - 14:36 | 3247114 mantrid
mantrid's picture

not again?

Fri, 02/15/2013 - 14:55 | 3247160 hedgeless_horseman
hedgeless_horseman's picture



How does one say, "Loan me another $50, Ben, I think she really likes me," in European?

Fri, 02/15/2013 - 14:59 | 3247177 Stackers
Fri, 02/15/2013 - 15:01 | 3247193 hedgeless_horseman
hedgeless_horseman's picture



Eight is OK?  I thought eight is enough.

Fri, 02/15/2013 - 15:32 | 3247346 He_Who Carried ...
He_Who Carried The Sun's picture

Gold is on its way to test 1560 again. And then...??  Soros sold all his ...

Fri, 02/15/2013 - 18:07 | 3247919 The Heart
The Heart's picture

One of the greatest considerations for those who are jumping ship now is actually learning another language in lands where americans are not too well appreciated, or wanted. Some say Chile is the best place to go.


Fri, 02/15/2013 - 15:01 | 3247192 Stock Tips Inve...
Stock Tips Investment's picture

The economic situation in Europe is very difficult and will remain so for several more years. In this process, banks suffer greatly. Do not forget that leverage "normal" banks is 10 to 1. This means that a small decline in lending, generate a lot of damage in the equity of these banks. The important thing is to see what the response of the authorities and whether they can sustain this situation for several more years.

Fri, 02/15/2013 - 15:04 | 3247200 hedgeless_horseman
Fri, 02/15/2013 - 15:02 | 3247198 Lore
Lore's picture

Simple analogy, but you nailed it.

Fri, 02/15/2013 - 15:16 | 3247251 Non Passaran
Non Passaran's picture

Shit, few years back they used to ask for $20. Inflation I guess!

Fri, 02/15/2013 - 15:23 | 3247293 chubbyjjfong
chubbyjjfong's picture

The colors of that couch are really clashing for me and the mural is disturbing the feng shui of the whole room.

Fri, 02/15/2013 - 15:33 | 3247351 hooligan2009
hooligan2009's picture

"show us your growler" springs to mind..

Fri, 02/15/2013 - 16:58 | 3247706 Ying-Yang
Ying-Yang's picture

She looks like she is stuck to the pole.. poor girl

Fri, 02/15/2013 - 15:01 | 3247189 Stackers
Stackers's picture

again ? nope, still the 1st time.

Fri, 02/15/2013 - 14:37 | 3247116 Cognitive Dissonance
Cognitive Dissonance's picture

We ain't seen nuttin' yet.

<Sshhhhh, act two is just about to begin.>

Fri, 02/15/2013 - 14:36 | 3247117 Silver Bug
Silver Bug's picture

Don't worry the banks will be fine, I heard they have 10 Trillion Zimbabwe dollars in reserve.

Fri, 02/15/2013 - 14:44 | 3247142 mantrid
mantrid's picture

throw in some russian meteor debris into balance sheet too

Fri, 02/15/2013 - 15:00 | 3247174 TruthInSunshine
TruthInSunshine's picture

The EU needs to follow the U.S.S.A. in its bid for the survival of its banking sector-

where U.S. banks are about to receive EVEN MORE LUDICROUS leeway to mark their assets to unicornium-valuations:


Proposal Gives Banks More Freedom to Value Assets

Published: February 14, 2013

The board that sets American accounting rules moved on Wednesday to substantially reduce the use of market values in financial statements. The move, if adopted, would give banks more freedom to value financial assets as they deem appropriate.


Long live the Ponzi.

If they'd extend this "freedom" to individuals, think of the credit boom that would result. You'd have 18 year olds obtaining loans for their "higher education," a new C7 Corvette AND a new McMansion based on their self-reported valuation of that Darryl Strawberry rookie baseball card they've pledge as collateral for said loan.

Fri, 02/15/2013 - 15:00 | 3247186 Lore
Lore's picture

They don't value financial assets. We have a market for that.

Fri, 02/15/2013 - 15:25 | 3247300 _ConanTheLibert...
_ConanTheLibertarian_'s picture


Fri, 02/15/2013 - 17:08 | 3247720 hedgeless_horseman
hedgeless_horseman's picture



"They don't value financial assets. We have a market for that."

...and scene.  That's a wrap everyone.  See you at the party.

Fri, 02/15/2013 - 15:39 | 3247381 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

fucking unbelievable

Fri, 02/15/2013 - 14:39 | 3247124 swissaustrian
swissaustrian's picture

Time for another scheme. OMT, ESM and LTRO are so 2012.

Fri, 02/15/2013 - 14:40 | 3247127 toys for tits
toys for tits's picture

This calculation doesn't take into account the billions the Fed has pumped into Euro-banks as the Tylers have pointed out.

It'll be interesting to see if the Fed's "investment" went to one of the more corrupt banks.

Fri, 02/15/2013 - 14:42 | 3247131 Jayda1850
Jayda1850's picture

ESM?  completely forgot about that one, it was so 2012. All the hip kids are about the OMT now. Any 3 letters for the same bullshit.

Fri, 02/15/2013 - 14:41 | 3247134 AldoHux_IV
AldoHux_IV's picture

That awkward yet glorious moment when people realize the world is one big NPL.

Fri, 02/15/2013 - 14:42 | 3247137 SheepDog-One
SheepDog-One's picture

They've fixed it before, I'm sure theyll fix it again....our only concern should be buying as much of the all-time bubble top high stawk indexes as we can!

Fri, 02/15/2013 - 14:43 | 3247139 hannah
hannah's picture

"...that euro-land banks in the aggregate now hold € 918 billion ($1.23 trn.) in non-performing loans (7.6% of all loans outstanding).'


please...!...they have 100% non-performing loans. these banks are toast!

Fri, 02/15/2013 - 14:44 | 3247141 Lore
Lore's picture

RBC Global Assets told me last week, almost a direct quote, that 'The trouble in Europe is over.'  Everything is gonna be okay.

Fri, 02/15/2013 - 15:31 | 3247339 hooligan2009
hooligan2009's picture

it is by canadian the europeans just have to export ther central bankers an dpretend they aren't leveraged and hope those drones pick on someone else!

Fri, 02/15/2013 - 14:46 | 3247145 mantrid
mantrid's picture

the chart looks like normal distribution, so it must be normal, eh?

Fri, 02/15/2013 - 14:47 | 3247149 Quinvarius
Quinvarius's picture

6.5% money supply increase in January.

I the we are printing another bailout up quite nicely.

Fri, 02/15/2013 - 14:48 | 3247152 bidaskspread
bidaskspread's picture

If the ESM wants to retain its AAA rating, it will have to find legal leverage like the US DOJ against the rating agencies. It's the new bond program called "leave no rating behind", every bond deserves a triple AAA chance, it's only fair.

Fri, 02/15/2013 - 15:01 | 3247191 Poetic injustice
Poetic injustice's picture

I think they should introduce AAA lottery, random winning 10 companies each month get AAA rating while others get BBB ratings.

Fri, 02/15/2013 - 16:06 | 3247487 bidaskspread
bidaskspread's picture

You are onto something.

Fri, 02/15/2013 - 14:48 | 3247153 Sophist Economicus
Sophist Economicus's picture

None of these NPLs will ever see the light of day again.    And as we all suspect, the NPLs percentage are probably multiples of the 7.6% aggregate total.

It is crazy how all of these analysts use yesterday's thought process in analyzing today's reality.    Throw out the old playbook.    All this stuff will be bought, put in the vaults of the CBs and will never, ever be marked to market again.   Anything else will crash the system -- and while the system will ultimately crash, IMHO, it won't happen via loan defaults.

Fri, 02/15/2013 - 14:48 | 3247154 jubber
jubber's picture

So anyone know who are the worst Banks now, I know it use to be BNP, Deutsche, National bank of greece, etc but has there been any up to date info out there?

Fri, 02/15/2013 - 14:55 | 3247165 steve from virginia
steve from virginia's picture



Banks are creaking like rickety old chairs w/ fat people in them,


Brent @ $117+/barrel,


Small payout to Spain so far but massive payouts to come,


Massive payout to Ireland so far but repayment can only occur if Ireland can start borrowing again ... You can't make this shit up!


Target2 system liabilities are fixed to Germany ... and will become German property if anyone exits the euro, T2 liability is not on the chart.


Forex euro liabilities by way of CHF = to the amounts equal to those in the bank charts ... and will fix themselves to Germany if anyone exits the euro or if the EUR/CHF peg breaks down. Forex liability is not on the chart ...


Unknown Russia liabilities by way of Cyprus, collateral is Russian crude (trying to fund crude for gold trade at same time so collateral is diminishing). BTW: there is almost no collateral in the EU, anywhere.


Meanwhile, every single euro spent on (imported) fuel is a euro that is thrown away, burned up for nothing. ECB and Brussels are intent on bringing the 'burning up for nothing' process back to levels that allow increase in lending by private sector!


As if such a thing is physically possible! Unbelievable!



Fri, 02/15/2013 - 15:11 | 3247228 Non Passaran
Non Passaran's picture

Nice rant but I disagree about the oil money being wasted.
Money so burned is used to buy euro exports or to finance euro debt. It is not "lost" in terms of its usefulness to the EU.
I am bearish and agree with the rest.

Fri, 02/15/2013 - 14:59 | 3247176 IridiumRebel
IridiumRebel's picture

You see this feed go dark, I'd duck and cover.

Fri, 02/15/2013 - 15:08 | 3247219 NoWayJose
NoWayJose's picture

Any wonder the central banks want inflation?  It's to get these non-performing loans to suddely become whole again, at least bringing the value of the houses back up to the amount of the mortgages so that the banks can foreclose.  

Fri, 02/15/2013 - 15:15 | 3247254 semperfi
semperfi's picture

"What difference does it make!?"

Fri, 02/15/2013 - 15:31 | 3247332 fuu
fuu's picture

Welfare bitchez!

Fri, 02/15/2013 - 16:09 | 3247504 timbo_em
timbo_em's picture

As long as the regulatory bodies allow banks to mark to mystery and Central Banks provide liquidity en masse with no collateral requirements, what impact do NPL have?

Fri, 02/15/2013 - 16:22 | 3247562 Colonial Intent
Colonial Intent's picture


USA ain't perfect neither.


LIZ WARREN: When was the last time you took a bank to trial?
THOMAS CURRY, HEAD OF THE OFFICE OF THE COMPTROLLER: We view the mechanisms we have as tools for correcting deficiencies? So the primary motive for our enforcement actions is to really identify the problem, and then demand a solution to it on an ongoing basis.

LIZ WARREN: So you set a price for that, and it’s effectively a settlement. So what I’m asking is when was the last time you took a big financial institution–a Wall Street Bank–to trial.
TOM CURRY: The institutions I supervise…we’ve actually had a number of consent orders, and we do not have to bring people to uh trial or uh–”
LIZ WARREN: I appreciate that you say you don’t have to bring them to trial. My question is, when did you bring them to trial?” she responded.
TOM CURRY: We have not had to do it as a practical matter to achieve our supervisory goals.


ELISSE WALTER: Thank you Senator. Uh. Uh. Among our remedies are penalties but the penalties we can get are limited and we’d have to ask for additional authority as my predecessor did to raise penalties. When we look at these issues–and we truly believe we have a very vigorous enforcement program–we look at the distinction between what we can get if we go to trial and what we can get if we don’t.

LIZ WARREN: I appreciate that. That’s what everybody does. Can you identify the last time when you took the Wall Street banks to trial?
ELISSE WALTER: I will have to get back to you with specific information.


Fri, 02/15/2013 - 22:46 | 3248609 torabora
torabora's picture

Liz Warren is a proven liar...what a nag too.

Sat, 02/16/2013 - 05:10 | 3249020 Colonial Intent
Colonial Intent's picture

If republicans had the balls to ask those questions, then i'd be a republican, but they dont have the balls do they.

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