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Is The Collapse Of Cyprus Due To This Man?
Pinning the blame for the collapse of the Cypriot banking system (and the country itself) on the shoulders of one man may seem harsh but Laiki Bank's chief risk officer Dimitris Spanodimos represents the tip of the spear of mass delusion that encompasses most (if not all) of Europe. Cypriot banks had been swamped with deposits courtesy of their cozy relationship with Russia and this left them with, in Spanodimos' words, "comfortable liquidity and capital position to deepen selectively some highly profitable and highly promising client relationships." In short, they had so much excess that they had to invest it somewhere and given the regulators light tough (which gave the banks a clean bill of health through 2011), they bought Greek government debt and extending huge amounts of mortgage loans (in Greece and Cyprus). So, as the WSJ reports, while everyone else was purging, Spanadimos had swallowed the red pill and decided his banks' gorging on extremely risky investments was tolerable - until of course the EU pulled the plug with the haircuts from the Greek bailout. These losses, and the need for new capital, is why Cyprus needed a bailout - so who is to blame...
So a combination of zero-risk-weighting for Greek government bonds (and their juicy yield), huge deposit inflows, abysmal regulatory oversight, and a risk-manager devoured by the mass delusion that Europe (and more specifically Greece) was all going to be ok (who decided to pull a 'Corzine') - is why the Cypriot banks collapsed - and why the Cypriot people now stand in the street looking for handouts...
In August 2010, Greece's economy was tumbling into depression amid angry street protests and a €110 billion bailout. Dimitris Spanodimos, the chief risk officer of Cyprus's second-largest bank, remained bullish.
Mr. Spanodimos boasted on an Aug. 31, 2010, conference call with analysts that the bank was expanding faster than rivals in Greece and bulking up on residential mortgages. "We have used our group's comfortable liquidity and capital position to deepen selectively some highly profitable and highly promising client relationships," he said.
His bank, Cyprus Popular Bank PCL, is now ruined. Its destruction—and the near-failure of its larger peer, Bank of Cyprus PCL—was the result of poor choices by bank managers and of a European regulatory system that gave both banks a clean bill of health as their infections festered.
...
An examination of regulatory documents, conference-call transcripts and financial filings shows that both banks gorged on Greece while nearly everyone else was purging.
In late 2010, even after German and French leaders had openly agreed that creditors of fiscally weak governments should take losses on future bailouts, the two Cypriot banks appeared nonchalant about their exposure to Greek government bonds.
By the end of the year, according to European regulators, the two banks had a combined €5.8 billion ($7.5 billion) of Greek government bonds—€1 billion more than they had held just nine months earlier, and a sum equivalent to about one-third of Cyprus's annual economic output. By comparison, over the same period, Barclays cut its Greek government exposure by more than half.
Both Cypriot banks passed Europe-wide stress tests in 2010, relieving them of pressure to change course. They passed again in 2011.
"Their regulator was clearly signaling it was OK to go on" expanding in Greece, said Christine Johnson, a bond-fund manager at Old Mutual Global Investors in London, referring to Cyprus's central bank and European banking regulators.
Cyprus Popular and Bank of Cyprus have booked combined losses of €4.3 billion on their Greek government-bond holdings.
...
For a while, the Greek business was good, as both banks pursued business with their fellow Hellenophones. The 2006 annual report of Bank of Cyprus speaks of its "dynamic expansion in Greece" and plans for more branches. By the time Greece began to teeter in late 2009, both banks were in deep.
...
In July 2010, a pan-EU regulator conducted "stress tests"
...
Cyprus's two main banks passed easily, with a total of €572 million of surplus capital. The Central Bank of Cyprus declared "deep satisfaction" with the results, which it said "demonstrate the ability of the domestic banking sector to withstand shocks under adverse scenarios."
In 2010, after getting that all-clear, ... Both banks also expanded their portfolios of soon-to-be-toxic Greek government bonds.
In February 2011, Cyprus Popular's then-CEO Efthimios Bouloutas said "we're extremely comfortable" with the bank's capital levels, which he predicted would rise as Cyprus Popular churned out profits."We don't have any rush to strengthen them," he said. He couldn't be reached to comment.
Also that month, Mr. Spanodimos, the risk officer, told analysts during a conference call that he didn't think Greek or Cypriot loans would go bad at an increasing clip.
Around the same time, a top executive at Bank of Cyprus told analysts that the lender was "selectively and cautiously expanding its business in Greece," and noted the bank's capital position "remains strong."
In 2011, the European Banking Authority ordered more stress tests. Like the ones the previous year, they didn't contemplate losses on government bonds. The two Cypriot banks were again found to have plenty of capital to withstand a deteriorating economic environment.
Less than a week after the results came out, European leaders reached a deal for a new Greek bailout that included losses on Greek bonds. That plan was never executed—another plan,which saw steeper losses, eventually was—but now the specter of such losses was out in the open.
...
Three months later, Cyprus Popular executives said they were racing to downsize their Greek government-bond holdings. Mr. Bouloutas told analysts in late November 2011 that the bank was seeing some customers pulling their deposits as a result of "all this adverse publicity," but expressed confidence the trends would quickly stabilize. A week later, he resigned as CEO.
That year, the banks realized huge losses on their Greek government bonds. Both were left with lower capital levels than Cypriot regulators required. Bank of Cyprus scaled back its lending to individuals and small businesses in Greece, but its loan portfolio there stood at about €10 billion. Nearly 12% of the loans were classified as nonperforming.
...
Bank of Cyprus's estimated deficit was €1.56 billion and Cyprus Popular's was €1.97 billion. The banks had until June 2012 to come up with the new capital.
They couldn't raise enough, and Cyprus needed a bailout.
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How long was he with Goldman?
That's what I want to know.
If you deposit $100 with the bank, that's your problem. If you deposit $100 million with the bank, that's the bank's problem." - J. Paul Getty
"If you buy bonds issued by a country that is obviously bankrupt, you're a fucking moron." - Me
And now we start to see the true fuedal style wealth transfers unmasked in the circular ponzi scheme of banks using depositor money to buy government debt that has to be repaid with tax payer money, funding an extravagant crony bureaucracy and banker bonuses until it all blows up and the truth that they robbed the people of their money years ago comes out as the real accounting books are zero'd out.
And a tiny handful of men can destroy an entire country. The planet is littered with economic nuclear bombs waiting to detonate, the little ones disguised in buildings with fancy-lettered signs out front that say Banco this or Popular that, and the big ones with funny names like JP Citichase Bank of Merrill America.
And yet we are consumed with fear over terrorists or global warming or illegal immigrants. There's an old saying, "don't worry about the rain when you're sitting on a geyser."
One of these days she's gonna blow.
Mayer Rothschild was so right about controlling a currency and not caring about who writes the laws. Several countries now have been conquered and subdued without firing a single shot. The only shooting that will happen will be between the citizens, after the bankers have walked off with the money.
Hang 'em high...
It's so curious!
90% of the American population seem to remain totally clueless about the impending collapse of the US Dollar.
Maybe they are more at ease now that Dancing With The Stars season has started!!
Thats beautiful............
right after Haliburton gets the no bid contract
http://dealbook.nytimes.com/2008/11/05/former-bear-stearns-risk-manager-...
"...is now a senior official of the Federal Reserve division that supervises U.S. banks."
Snort.
With his experience, he is PERFECT for the job.
Sorry, but are you a certified financial advisor?
Except when you do it with other people's money. There's a different word for that.
Miffed;-)
"Also that month, Mr. Spanodimos, the risk officer, told analysts during a conference call that he didn't think Greek or Cypriot loans would go bad at an increasing clip."
assuming decision makers are "morons" is usually a mistake
Cassano? Mozillo? US S & L owners in 1980's after change in laws - were real estate developers especially south west and CA - its was about looting - selling the same property over and over at escalating values to the same tribe each taking a piece and drive the S&L in to BK
how could cassano buy $80-160 Billion in risk - for CDS on CDO's at AIG ????
when it doesnt make sense someone is getting paid personally for the decision
in greece two years ago when the Premier after being told by the troika that they would be getting hammered he said he would put it to a referendum to the people like Iceland - on a thursday - on following monday he changed his mind - in the interim his nephew in France traded CDS on greece and made a $1.2 billion
these guys are all using their position to steal nothing else is going on
But all the financial experts agreed Greece's problems were fixed by the bailout.
If you deposit $100 million with the bank and the bank has a problem, you just lost your $100 million.
"..you just lost your $100 million"
No deposit insurance at USD banks? In Europe you might only lose 99.9 million. The remaining 100 k can be withdrawn in tranches of 300 Euro a day. No need for foodstamps after the bank goes bust. One of the benefits of banking in EU!
I think he meant to say "loan" instead of "deposit"
That's why you need to "go squirrelly": Squirrel away your stash of precious & cash in lots if places.
Else you get what you deserve.
The King is only 'King' at the pleasure of his court. While the focus is on him it is clear he is doing the bidding of his court. So blaming him for what he does is missing the bigger picture.
<Can you say "misdirection" and "scapegoat"?>
oh, i like your riddle. you're coming along nicely
court, court.....you mean like "court jew", ... the hofjuden, http://en.wikipedia.org/wiki/Court_Jew
What did he do? Nothing wrong; he listened to the EU rhetoric that all was better and fixed moar. He is a hero.
Better yet, he probably thought he was doing his part to help save the integrity of the EU.
Yes he's a hero.
What I don't understand is why they hadn't bought CDS to cover for this possibility. If they'd read Zerohedge, instead of having zero hedge, maybe things would've turned out different.
Cyprus and Slovenian CDS Spreads Exploding......
http://wallstreetfool.com/2013/03/28/credit-markets-update-march-28th-2013/
Cypriot euro notes have a G serial number on the back. Slovenian euro notes have a H serial number on the back.
Just sayin'
When is a euro note not a Euro note?
G = Gone
H= Hosed
This man personally delayed the S&P from breaking all time highs for several days. I demand an apology.
fonzannoon, look deeper. the only way the stawks will be able to break one record high after another if things, by the magic of reuters headline, get unfixed (-1pt) then refixed (+3pts).
I'm sure CRO Dimitris Spanodimos thought he had built a stronghold balance sheet and Greece was only a tempest in a teapot.
Is he an admiral in the US Navy?
Nah, more likely from the CIA School of Risk Management.
The same school of 'Group-Think' that claimed that Iraq had WMD's. The dynamic is the same every time: One or few Alpha Dogs bark out some proclamations, the Betas get in line (if they know what's good for them), and the rest of the pack just runs along.
The truly evil sociopaths will position themselves at the top, so they can leverage the rest toward their egomaniacal goals. In a healthy system the checks & balances prevent that. In a sick one, they don't. Kirk out.
I was mocking Bruce.
Sorry. Mine was directed at 'Malaka' Spanomidos.
Actually, the CIA did their best to inform everybody they thought the Iraq WMD's claim was bogus. But no-one in power wanted to hear it... not 'right-wing' Bush* or 'left-wing' Blair*
*left-wing, right-wing, LOL
I was looking at Cyprus banking stocks this morning. What a disaster.
now is the time to buy
Perhaps, but holding one of those bank stocks over the weekend is a task more suited for a stunt man than an investor.
If you are a Cypriot, no need to buy 'em. You are probably being paid in BoC or Laikia shares by now...100 per hour.
Insolvent bank shares. The new Cypriot currency.
Tip from Cramer ?
Shouldn't that say "he swallowed the BLUE pill" rather than the Red?
(not to nit-pick on the metaphors but...)
I was wonderin' that myself...
People who don't like nitpickers ... apparently want nits!
There is a cure for them...
I wouldn't blame Mr. Spanodimos, but it must be admitted that when facing systemic risk and/or political risk, the CRO "model" and the Basel II "framework" have a value approaching nil.
The bank was owned by Marfin, a Greek financial company. He did what his boss asked for and Govt regulators approved of.
...and let's face it, back then the ECB (EU, IMF, Bundesbank, etc. too) cheered and loved every Greek bond Cyprus Popular purchased - it was one less that they would have purchased and TARGET2'd to the Bundesbank.
So basically Laiki and BOC would have been better off just torching their Greek holdings back in March 2010. Solid returns.
Wasn't the Norvegian sovereign fund also long GGB's?
Is it too late to retract/clarify his Aug 2010 statement (a "deferred dieselboom")? Might help. Or not. /s
Things prolly wont work out for him as well as they did Jon C.
He's just another member of the cargo cult of central planners/bankers.
The question now is which other country bank's CRO/CIO was looking at their "liquid" balance sheet and decided it was a riskless investment to load up in Cypriot bonds, stocks and morgages?
The way the EU/ECB allowed these Cypriot banks to load up on Greek sovereigns reminds me of how Roosevelt kept knowledge of the attack from his generals at Pearl Harbor. That the EU at work: socialist utopia.
And they never waste a crisis.
Really 1 man can decided to spend all that money on bad risks and no one said hangon a minute?
I'm sorry but this is looking more and more like a controlled implosion, they bought the Greek debt on EU orders, looks like a game of pass the default parcel around europe, Hey Tyler your good with this binary money stuff who does the music stop on next?
PS: they thought they could pass on some of this to the Russkies, forgot to lock the back door though, servers 'em right.
I'll bet dollars to donuts (as long as I can securitize the donuts, sell CDSs to move risk to third parties) that Mr. Spanodimos has been influenced/corrupted by Goldman Sachs.
It's the circle of life.
Hakuna Matata, Bitchez.
People only get away with what they can, because they can. Bankers are no different. It's the people's fault for allowing the bankers to steal. The bankers have their escapes already planned, while the goyim exterminate each other.
this argument denies the ACTIVE mechanisms of mind control / programming the populace endure each and every day.
people arent sheeple by accident
So, was the evil plan to make Cyprus the bad bank and then implement Corzine's MF Protocol?*
*Same as a template
I really want to be one of those who is laughing all the way from the bank.
If the international bankers who are conniving to keep the euro zone together as an important personal wealth and power contributor need to find a culprit for the Cyprus crisis (which they created), it should be a Cyprus citizen.
Did Spanadimos cause the crisis? No. He’s only the latest selected patsy for banker blame, second only to the "Russian oligarchs" and the German people. The WSJ, voice of Wall Street, not the Wall Street of former equity markets but the voice of Wall Street today, namely the occupied territory of the international bankers, cannot be trusted to tell us the root of the Cyprus problem.
When Spanodimos is frog-marched to jail, it will be safe to put money in any bank. Until then, the Soprano's have your money.
This has 2008 collapse all over it. Banks buying bonds they have no idea the risk associated with them to collect that high yield. These pieces of sh!t country bonds were both investment grade July 2011. They were investment grade in 2010. Objectivity by the rating agencies is totally fk'd if there was any. This is no different than 2008 and nothing has changed. These people running these banks are whores, sucking anything off for a little yield without thinking of the consequence. Ready the lawyers, here comes some lawsuits against the rating agencies.
wrong.. this article is pure Bullshit..
again..blaming and pointing fingers at rogue traders.. r u kidding me?
bull shit
a CB central planner insider would have to be deeply knowledgable on the folly of CDS, MBS,CDO, Sovereign Paper..etc..
this shit has happened all too frequently to be coincidental or accidently or built on ignorance.. the probabilities impossible.. to imagine the reoccurance without accepting.. DESIGN
Because, I have some knowledge from the inside i can assure you that the below is what happened:
The DISASTER for the Cypriot Banks, came from the ministry of finance in Cyprus, back in May 2012 when the Greek PSI took place.
Both banks had ~5b of GGBs when the Cypriot Minister of Finance obliged both banks to participate in the haircut, even though everybody told him against it. He even pledged the GGBs under British Law...
You all know that the participation was voluntary...
So, you can understand that the decission was not up to the Banks but to the political persons at that time!
I wouldn't be surprised to learn the banks were also leaned on to buy more GGBs.
The Cypriot Banks acquired the GGBs in 2009, a bit before the Greek elections and early after the elections. If you remember on Nov 2009 the Government changed and Papandreou took office and in 3 months he had Greece early Feb 2010 applying to the IMF and the EU.
This is the guy who described, with his finance minister, Greece as a "Titanic"...which CEO says something like that for the company who works for and has been elected by its shareholders? Papandreou did that against his oun country.
Thus, the banks had no idea what to do after that. They had bought in the 80s and in one day the price was in the range of 30-40s...no management could forsee that.
The same happened with all the Greek banks. They were obliged to participate in the PSI even thought they knew that after that they would have negative capital. The shareholders said that they would sue all bank Boards for breach of confidence if they took part. And guess what happened. The Gov. passed a law which gave absolution to the Bank Boards, in order to participate in the PSI.
The result? All Greek bank except one up to today are zombie banks wiht negative capital structure because of this. The Banks did not start antything in Greece or in Cyprus. For sure they have their bad part in all this, but not 100%.
The politicians have the lions share of the blame...
So a WSJ article from yesterday ends with:
"The banks had until June 2012 to come up with the new capital."
Yeah, but what happened in between? / Yeah, what else happened? / Well, it went pretty much like this: ...
Not sure he really had a choice in the matter...
Then when the EXPERTS reminded us that the Greek Haircuts were too small to really matter, they could have made a mistake?
Wait until the real liquidation of these Cypriot banks gets underway. That will be the beginning of the real mark-to-market.
spanner in da works demos...
This is an excellent article for understanding the basic flaws that led to this mess. Thanks Tyler(s).
Has anyone seen an article that explores the issues of derivatives as they related to this current mess. My gut tells me that there are some very nervous folks out there in the TBTF banks who may have considerable exposure - but hard facts seem lacking a bit...
well tovarisch, with a name like spend dime what were they expecting?
Now does anyone here really believe that this guy didn't get a call from the EU to prop up Greece?
They told him to use the excess deposits, Russian money, and prop up Greece. then things got worse than imagined. They then not only cut him loose but left him swinging in the wind.
Can there be any other explanation?!
With that said, I would not want to be this guy or his family going forward--no place to hide. hujel
My point (as above) exactly.
This is a 4.2 billion loss. Where did the other 13 billion go?
Didn't Mr. Dimon buy a string of (polo) ponies for his kids?