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L'Horreur: Goldman Finds Europe's Two Worst Capitalized Banks In France

Tyler Durden's picture


Now that even the media world is once again looking closely at the impact of wild bond swings on bank balance sheets, and especially the P&L impact of their Available For Sale portfolios, it makes sense to take a quick glance at just which banks are considered the most overlevered in the world. Luckily, Goldman did just that, and the results are below. Some advice to our French readers: you may want to turn away. If the ongoing bond volatility continues, Credit Agricole and Natixis may be the first two banks that the French socialist president will proudly be forced to nationalize to avoid a collapse of the country's banking sector.

So without further ado, L'horreur, L'horreur (from Goldman's Jernej Omahen).

And some more from Goldman:

RWA, leverage debate reopened


Over the past 10 days, statements on RWA and leverage (by a long list of global regulators) have reignited the European capital debate. It appears that simple leverage – possibly calibrated higher – is becoming a point of regulatory consensus. For those European banks that screen well on riskbased capitalization, but poorly when the total exposure measure is, simply, assets, this is a troubling prospect.


Leverage: (Trying to) keep it ‘simple’ The differentials for simple leverage, among European banks, are large. This is neither a new, nor a binding regulatory constraint. However, with the ‘new Basel leverage ratio’ as a supplement for CT1, it is bound to change. There are three main definitions of ‘simple’ leverage: the US-style leverage; the Basel leverage ratio; and CRD IV leverage. We are able to estimate only the US-style leverage. We know, however, that the Basel leverage ratio is more conservative as it expands the total exposure metric from assets to include off balance sheet and derivative exposures.

And a quick look at that other perrennial most undercapitalized bank, Deutsche Bank.

DBK’s recent capital raise has improved its CT1 ratio to 9.5% (fully phased B3). In our mind, the central question, “is it enough?”, remains. On the basis of CT1 ratio (i.e. risk-based capitalization) DBK has indeed lifted its capital towards the levels of the better capitalized banks in the sector. However, at 29x, its simple leverage (a non-riskbased metric) remains high in the context of the European sector and the global peers. In our view, the return of the leverage debate is unwelcome for DBK share performance.


For Deutsche Bank, the interplay of three factors – (1) focus on simple leverage, (2) geographical capital fragmentation, and (3) potential upward calibration of US minimum leverage requirement – represents a new challenge.

So there's a chance for, Das Horror, Das Horror

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Wed, 06/26/2013 - 18:39 | 3697108 TheFourthStooge-ing
TheFourthStooge-ing's picture

I think you mean L'Whorreur.

Just tryin' to help.

Wed, 06/26/2013 - 19:13 | 3697193 dtwn
dtwn's picture

I enjoy a high T & A ratio.  If you know what I mean.

Wed, 06/26/2013 - 19:29 | 3697224 kaiserhoff
kaiserhoff's picture

or et l'argent, impressionnant.

Vive le Frogs.

Wed, 06/26/2013 - 19:30 | 3697235 knukles
knukles's picture

Suck my escargots

Wed, 06/26/2013 - 19:38 | 3697249 FL_Conservative
FL_Conservative's picture

I thought the ECB was located in Germany?

Wed, 06/26/2013 - 19:43 | 3697259 knukles
knukles's picture

Details details details...

Thu, 06/27/2013 - 05:39 | 3698402 falak pema
falak pema's picture

Draghi has his nuts caught in the MPS scandal; 8 bliiion derivative gapppppp?

Nothing to it! 

Wed, 06/26/2013 - 20:08 | 3697324 DoChenRollingBearing
DoChenRollingBearing's picture

There are a lot of smart & knowledgeable ZH-ers.  Would one or more of you answer something for me?

How do those European bank ratios compare with American banks?

Thanks mucho!

Wed, 06/26/2013 - 21:09 | 3697491 kaiserhoff
kaiserhoff's picture

The short answer is - I don't know.

The second short answer is - it doesn't matter.  Without mark to market, you have to assume that all large banks are broke, so there is no capital. 

This may matter.  The US has over 8,000 financial institutions, mostly banks.  Some of the small and regional ones are in decent shape.  I don't know of a Euro nation that has anything like that depth.   When the whole thing has to be rebuilt, the US might have an edge, but sabe dios.  Longish answer to a good question;)

Wed, 06/26/2013 - 21:27 | 3697533 DoChenRollingBearing
DoChenRollingBearing's picture

Yes, it might not even matter if they are linked too strongly...

Thu, 06/27/2013 - 01:22 | 3698163 HalinCA
HalinCA's picture

Two suggestions:


1 - State chartered private banks - they do still exist.


2 - Credit unions.


Statistics on the second exist, but the first?  Who knows ....

Wed, 06/26/2013 - 18:46 | 3697115 GVB
GVB's picture

So this banking system is inter-connected?

Wed, 06/26/2013 - 18:45 | 3697118 buzzsaw99
buzzsaw99's picture

Nobody questions the squid's balance sheet. The squid has ballz of steel. http://www.youtube.com/watch?v=5ZRCGKwWgC8

Wed, 06/26/2013 - 19:23 | 3697213 BigJim
BigJim's picture

Yes, scrutinising those tables reveals Goldman Sachs is nowhere to be found.

Or the Morgue, for that matter.

I guess because those two institutions are just too conservative to 'do' leverage.

Wed, 06/26/2013 - 19:31 | 3697237 knukles
knukles's picture

Chuck Norris defends the Squid

Thu, 06/27/2013 - 01:41 | 3698192 rocker
rocker's picture

Goldman owns the FED, has Bank Status, (thank you Hank Paulson), and is funded by the Treasury.  No Worry Here.  

Wed, 06/26/2013 - 18:56 | 3697148 Bay of Pigs
Bay of Pigs's picture

MOAR champagne! Vive la France!

Wed, 06/26/2013 - 19:01 | 3697158 newengland
newengland's picture

Mr Blankfein.

This is not God's work. This is money's work. Sort it.

Wed, 06/26/2013 - 19:01 | 3697160 Seasmoke
Seasmoke's picture

The crisis is over.. Enjoy the Summer.

Wed, 06/26/2013 - 19:07 | 3697176 geotrader
geotrader's picture

It's a good thing no amerikan banks are overlevered.  It could turn into a real problem.



Wed, 06/26/2013 - 19:17 | 3697188 falak pema
falak pema's picture

these banks have been sold to qatar; no longer Hollande's problem; along with football club PSG.

I think that hollande expects Qatar to play proxy nationaliser for France of its own banks.

We have ze best friends in ze world; all zey want is to come to Paris; voilà. 

The amusing thing is Moodys did a stress test on these banks only last month and gave them a clean bill of health. Presto! 

Wed, 06/26/2013 - 19:27 | 3697221 q99x2
q99x2's picture

If there were any socialism left in France the first thing they would do is let their banks fail and move to BitCoin or other crypto-currency. But not Facism exists in France just as it does here.

Wed, 06/26/2013 - 22:33 | 3697756 RaceToTheBottom
RaceToTheBottom's picture

We don't need no "crypto-currency", we got a "clepto-currency".

Wed, 06/26/2013 - 20:33 | 3697398 WTFUD
WTFUD's picture

It all stinks of merde! We laugh we cry we make fun but all said and done the stench of shit remains 5 years later! The scummy US & Euro + UK governments strut about like they are something, however, it's pitiful, they are nothing but pathetic losers taking the piss out of ALL of us. No conscience, no backbone and much contempt. The MSM are equally shameful, they are payed to lie every fucking day for a living, to maintain the charade. NO AMOUNT OF MONEY COULD ENTICE ME TO STAND UP IN FRONT OF A CAMERA AND DUMP OVER FOLKS LIVES NO MATTER HOW STUPID OR WEAK THEY ARE. We are living in one giant cesspool of merde. The stage is set for the youth to change this and i pray they do at any cost of living this nightmare day in and day out.

Wed, 06/26/2013 - 20:41 | 3697421 Decimus Lunius ...
Decimus Lunius Luvenalis's picture

Leverage smeverdge.  All of those assets are insured by well-capitalized banks.  In the incredibly unlikely situation that a counterparty to those insurance contracts turns out to fibbing about it's ability to pay, Mario and Die Furherin will confiscate deposits (fair is fair after all) and inject plenty of electrons with the help of Uncle Ben and maybe even Abe.  A harmonious effort where a Jewish U.S. central banker works hand in hand with Axis powers to save Europe.   The great dream of post-WWII progressives will finally be realized.   My grandchildren will visit the old ECB building in Frankfurt like I visited the beaches of Normandy.  Granted they'll be visiting it because it'll be a great spot to panhandle, but they'll visit.  

Wed, 06/26/2013 - 21:37 | 3697560 Augustus
Augustus's picture

Note that the reason for the different ratios for the same bank are caused by the holdings of "riskless" assets.  The only riskless assets are government bonds, all of which the EU pronounces as equal in default risk = 0.  The problem is that the EU cannot change that rating method as the countries rely upon the highly leveraged banks to absorb even more of the bonds to continue the deficits.

Wed, 06/26/2013 - 21:59 | 3697633 Colonel Klink
Colonel Klink's picture

Zeee bank stabiliteeee!

Wed, 06/26/2013 - 22:47 | 3697804 hooligan2009
hooligan2009's picture

isnt goldman scahs a bank? do these numbers include assumptions for signle failed counterparties (one of ML, JPM, DB, MS, etc etc)? where are net derivative exposures? what about reserves for a 3% increase in ten year bond yields (tapered across the curve of course).

how do these compare with VaR measures? whats the impact of convexity?

never mind..these are all national champion banks..especially the french and itlaian ones who have been part and parcel of all the financial engineering that goes for rule breaking using structures such as inverted equity pyramids..aka..CDO cubed

Thu, 06/27/2013 - 00:05 | 3698010 Nobody For President
Nobody For President's picture

I thought Das Horror was Merkel getting re-elected...

Thu, 06/27/2013 - 04:31 | 3698359 Cangoroo
Cangoroo's picture

Der Horror, even if Merkel is supposed to be female. Horror is male.

Thu, 06/27/2013 - 09:46 | 3698818 orangegeek
orangegeek's picture

Someone contact those fuckers at Fitch and see if the French government will allow them to report some truth about France.


Doubt it.  Fitch became a French government lapdog, as opposed to a ratings agency, a long time ago.

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