Eurogroup’s Dijsselbloem Says "Banks Should Save Themselves"

Tyler Durden's picture

The by-now infamous Dutch FinMin Jeroen Dijsselblom - and head of the Eurogroup of finance chiefs - made some fascinating comments this morning with Reuters and the FT that are changing the shape of European markets rapidly. From banks need to save themselves to forcing "all financial institutions, as well as investors, to think about the risks they are taking on because they will now have to realize that it may also hurt them," he is making a lot of sense - though we suspect Mr. Draghi will not be amused as his 'promise' looks like being tested. Simply put, Dijsselblom is saying that a balance sheet can be 'normalized' not only by boosting assets (courtesy of the ECB) but by collapsing liabilities (or remarking bad loans to market) - something that no one in power has admitted to date. While this is upsetting to markets - so used to the visible hand of central planning saving themfrom themselves - this is very positive step for 'real people' as taxpayers appear to be 'off the hook' and the responsible parties beginning to be punished.

Via Bloomberg:
Dijsselblom's direct quotations in the interview were confirmed by his spokeswoman, Simone Boitelle.

• “What we’ve done last night is what I call pushing back the risks,” Dijsselbloem says in the interview


• “If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalize yourself?’. If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders,” he says


• “If we want to have a healthy, sound financial sector, the only way is to say, ‘Look, there where you take on the risks, you must deal with them, and if you can’t deal with them, then you shouldn’t have taken them on,’” he says


• “The consequences may be that it’s the end of story, and that is an approach that I think, now that we are out of the heat of the crisis, we should take,” he says


• “It means deal with it before you get in trouble. Strengthen your banks, fix your balance sheets and realise that if a bank gets in trouble, the response will no longer automatically be that we’ll come and take away your problem. We’re going to push them back. That’s the first response we need. Push them back. You deal with them,” he says


• “We should aim at a situation where we will never need to even consider direct recapitalization,” he says


• “If we have even more instruments in terms of bail-in and how far we can go on bail-in, the need for direct recap will become smaller and smaller,” he says


• “I think the approach needs to be, let’s deal with the banks within the banks first, before looking at public money or any other instrument coming from the public side. Banks should basically be able to save themselves, or at least restructure or recapitalise themselves as far as possible,” he says


• “Now we’re going down the bail-in track and I’m pretty confident that the markets will see this as a sensible, very concentrated and direct approach instead of a more general approach,” he says


• “It will force all financial institutions, as well as investors, to think about the risks they are taking on because they will now have to realise that it may also hurt them. The risks might come towards them,” he says

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l1b3rty's picture

Jeff Berwick launching his first Bitcoin ATM in Cyprus? Then IRAN?

redpill's picture

Save yourself (as long as you are small enough and not based in one of the major European economies, in which case the tax payers will bail you out)!

idea_hamster's picture

So he says banks should "go [save] themselves", huh?

Well, I guess this explains what the ECB has always meant when they said, "Relax -- we're here to [save] you!"

Good to know the lexicon....

aint no fortunate son's picture

His talk will go over like a fart in church - hope he has some bodyguards because he is damn sure pissing off TPTB

LooseLee's picture

Fuck TPTB and the ass they rode in on. Off with their heads and anyone who 'supports' them---Ben Bernanke and his cronies surely included...

flacon's picture

MONEY should save itself. 

Too bad that is a mathematical impossibility when money is debt. 

Alea Iactaest's picture

<--- This statement was approved by the Troika

<--- He went off the reservation

D-Boom sounds reasonable, at first blush. It's what makes sense: equity, debt and uninsured "savers" get whacked. In context of recent events, however, this sounds kind of evil. Just setting the table for the main course, as it were.

In this context, capital controls make perfect sense to preserve The Bank to the benefit of all.

redpill's picture

The ONLY reason Cyprus happened as it did was due to the size of the banking sector relative to the GDP and population size.  In a large economy they would have nationalized the banks and put the losses on the backs of the taxpayers.  That they are pretending this is some advocacy to protect taxpayers is a fucking joke.  The reality is that they could have stolen every single penny from the Cypriot people and it wouldn't have made a dent in the problem, therefore they had to do something else.

GCT's picture

+1 Redpill. 

I honestly do not get his remarks.  My understanding is the central banks buy the government debt so how will they solve the problem as long as they continue to buy soverign debt?  I am all for letting the banks fail if they fucked it up but not failing because central government screwed the bank. 

There is no way to cover this. Am I looking at this wrong?

Ropingdown's picture

There's a lot to be said, though, for scaring large depositors into German, French, and Dutch banks.  Look out, Luxembourg.

asteroids's picture

All right, call this clown on the carpet TODAY. Let's mark every asset and bond "mark to market" TODAY. Let's see how many banks and funds implode overnight.

yrbmegr's picture

What if there is no market for an "asset"?  I suspect the big banks have substantial holdings of unique "assets" for which the market is inestimable.

viahj's picture

no reservation e-bay auctions?

Ropingdown's picture

It seems to me most banks can handle a lot of markdowns before they run through equity and the bondholders.  What is left is less frightening to the uninsured depositors...if there are any.

SDShack's picture

"Save yourself" means when we can't steal anymore, we are going to cannibalize the banks. Bankers are cannibals by nature. The TBTF's decide who will fail to feed them. See Bear Stearns. See Lehman. See Laiki.

Imminent Crucible's picture

I’m pretty confident that the markets will see this as a sensible approach,” he says

Uh, not looking good so far, Dieselboom. The EUR/RUB is getting hammered as Russian 'garks find ways to turn their euros back into Putin bucks. Stock markets--they hate it.  This is the end of banking as we've known it. It's just a question of how long before the message "All your savings are belong to us" sinks in around the world.


Timmay's picture

Allow me to translate: If you want to keep depositor's money in your banks, raise interest rates or risk capital flight.

NoCrazies's picture

Allow me to translate: If you take depositors money to make risky bets that explode in your stupid face; we are going to liquidate the bank assets, fuck the investors (who deserve what they get- they took the risk)liquidate any depositor we can claim is uninsured....... then he is left hannging on insured depositors. They sure were not claiming that insured depositors should not get a haircut, only after the globe yelled "holy Shit" did they back off of depositors insured up to 100K. I am fine right up to the point that they were willing to allow the Cyprus government to steal insured deposits.

Ratscam's picture

no more Too Big To Fail? I,m confused.....

MachoMan's picture

I wish it was that simple...  the sad part is that with government/central bank meddling in the worldwide economy, those "deposits" cannot be practically separated from moral hazard.  Those deposits invariably contain tax money...  along with a myriad of other things, the source of which is all the same.

Ropingdown's picture

Now it's clear to me how Bernanke plans to sell off his hoard of Treasuries.  "You got some big deposits you're worried about?"

Umh's picture

No moral hazard taking the depositors money?!

knukles's picture

Who the fuck is in charge, here?

magpie's picture

I agree, the intermediate bottom will only be reached when Draghi says something.

Anonymous peon's picture

Nobody. It's a financial wildfire and it's going to have to burn its self out.

McMolotov's picture

Sonic Diesel-Boom.

medium giraffe's picture

Fuck the banks, save the people! 

Bay of Pigs's picture

Save themselves? Like the drowning man catching the anvil?

Ropingdown's picture

Most of these drowning men should have grabbed an anvil before they hit the water.  That makes for a swifter and less painful death. (The cannonball grab in Master and Commander provides a nice image...Citi Board grabs one and ....)

Mordenkainen's picture

If only Hank Paulson had said this (and meant it) in '08, things would be quite different right now.

Stock Tips Investment's picture

I think from now, the solution to the problems of the banks go through that bankers, investors and large deposit holders carry part of the responsibility. If this happens, the bankers think twice before taking risks. We may be seeing the beginning of a change in the solution of financial problems.

LooseLee's picture

That corrupt POS didn't (and still doesn't) have the integrity or character to say such a thing.  Like most in Washington and on Wall St., he has no soul and hides behind the veil of power. When the people 'wake up', he will not be able to escape the carnage.

Mad Mohel's picture

The people aren't waking up......ever! This is going to go on for a long time. The sheep today are content watching reality TV and guzzling down McPuke.

Legolas's picture

Did we just hit the iceberg?  I think so.

McMolotov's picture

'Tis but a scratch, and the band is still playing, so all is well.

stant's picture

no, not just hit it ,more like backed up and hit again.

Dr. Kananga's picture

"Attention citizens of Cyprus--may I have your attention please. In an attempt to promote stability and confidence in the financial sector, the currency formerly known as the Euro has been replaced by the new and improved Klepto. Do not be alarmed..."

icanhasbailout's picture

Sounds like he finally got the translations of the Ron Paul speeches that he requested.

Byte Me's picture

I gather Dijselflower is NOT a Goldmanite??

knukles's picture

Ain't it amazing.
Bunch a low life politicians and petty bureaucrats trying to act like high financiers and look what happens
Holy shit.....

And the Democrats were worried about Palin
At least Palin could open her mailbox...

Byte Me's picture

Beginning to look like a faction fight y'think?

Ropingdown's picture

One faction's held all the cards for several years.  They've just been afraid to play them.  They got pushed too far.  Now they get their moment to prove what they said last year: "Bring down your risk, manage your banks and spending, or else we'll choose to either A. Squeeze you out of the euro zone or B. If you openly rebel, we'll just leave.  I'm interested in what the French reaction will be when the next set of  bank liquidations begins. 

McMolotov's picture

Is "open her mailbox" a euphemism?

eclectic syncretist's picture

it certainly doesn't sound like it.  The euro's dropping like a little bitch, but silver and oil seem to like what he has to say. 

Last one out turn off the lights.

slightlyskeptical's picture

I think this is the wrong reaction. Basically the ECB is saying they won't be running to rescue anyone, thus not throwing good money after bad. It should serve to strengthen the Euro.

The ECB is also making the US and Japan look like idiots with their free money policy.

MachoMan's picture

It's easy to do with a country that is a pimple on the ass of the euro...  it's like some county in BFE U.S. going bankrupt...  "see, we're like totally sincere about this n'stuff"

Acet's picture

Not really.

If you think as a (short-termist) investor, then the best place to park your money is the one where financials and the markets are being proped-up by sucking the money away from everybody else.

Thus if the Eurozone is not willing to further impoverish taxpayers to prop-up banks and markets, then it becomes a bad place for the fleet-footed short-term capital.

For those whose investment horizons are measured in decades it's the reverse, but there are very few of those around in the modern financial system (even pension money is moved around a lot by money managers to increase churn and comissions).