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Largest Austrian Bank Crashes After "Revealing" 40% Surge In Bad Debt Provisions, Record Loss

Tyler Durden's picture


Update: just as expected, the confidence-preservation brigade is quick on the scene:


Because clearly marking loans to fair value would crush investor confidence. And clearly investors are dumb enough not to realize that it is precisely by hiding what is beneath the surface, that they have zero confidence in the system.

* * *

Ever since 2012, when we first revealed that the biggest problem plaguing Europe's financial sector is the $2 trillion+ in bad debt on the books of European banks (not our numbers, the IMF's), it became clear that the only way Europe can avoid a complete financial meltdown coupled with currency disintegration, is if it can constantly keep rolling over said bad debt (obviously the only way to do that would be to create an epic debt bubble leading managers of other people's money to do idiotic things like buy Spanish debt at 2.75%). This is why not only the BOJ launched its mega QE in 2013, but why Draghi also kicked in with NIRP a month ago: the logic - do anything and everything to reflate the biggest credit bubble possible as otherwise European banks will have no choice but to face up to their trillions in bad loans.

Unfortunately for some banks, especially those which operate in Europe's supposedly highest-rated country, Austria, sometimes just being able to kick the can is not enough as on occasion a law will change, having the unintended consequence of forcing the bank to admit just how ugly its balance sheet truly is. That's what happened overnight when Erste Group, Austria's largest bank by assets, and the third biggest bank in Eastern Europe after UniCredit and Raiffeisen, announced that, oops, its earlier forecast about the amount of bad loans on its books is wrong, and will have to rise by a massive 40%, leading to what will be a record $2.2 billion loss, and triggering writedowns.

Shareholders, not used to being told the truth and instead preferring sweet, little lies, promptly took the stock to the woodshed.

Analysts, whose job it is to predict these things, were shocked:"This is a clearly bad surprise as it comes in addition to the already ‘badly surprising’ warning issued by the group at the beginning of this year,” Natixis Securities SAS analyst Steven Gould said in a note to clients. “These announcements hurt the management’s credibility going forward."

What was the catalyst for the early recognition of the massive writedown? Bloomberg explains:

The provisions are caused by new rules due to be approved by Parliament in Hungary today, forcing banks to refund “unfair” loan fees, and by the Romanian central bank’s push for faster bad-debt reduction amid the European Central Bank’s bank health check, Erste said. Writedowns on goodwill and deferred tax assets, triggered by the loan-loss provisions, may reach as much as 1 billion euros.


“By taking these measures, we have done everything in our power to avoid one-off effects from 2015 onward,” Chief Executive Officer Andreas Treichl said in the statement. “We are convinced that these measures will also help us pass the asset-quality review and stress test comfortably.”



Hungary contributed to Erste’s loss with a new law forcing it to repay some loan costs to customers. New rules due to be approved by Parliament in Budapest today will require banks to refund certain expenses on as much as 6.5 trillion forint ($28 billion) of loans going back as far as 10 years, according to the draft bill.


Higher bad-debt provisions in Romania, the Black Sea country of 20 million where Erste bought Banca Comerciala Romana SA for 3.75 billion euros in 2005, were caused by the central bank’s pressure on banks to clean up their balance sheets as part of the ECB’s bank health check, Erste said.

Ironically, it is the poor Eastern European sovereigns themselves who are forcing banks to do what is effectively is the job of their regulator, the ECB. Needless to say, the last thing the ECB will do is force banks to clean up their balance sheets: if anything Draghi knows full well that Erste is just the harbinger and Europe is loading to the brim with banks that are in the same situation. Should the ECB actually force banks to either revealt the true state of their bad debt and/or take measures to remedy it, the entire financial system would implode overnight.

Which is why instead we have an annual confidence building farce known as the "stress test", which in the past has seen Bankia and Dexia pass with flying colors, and this year would have also given Erste an AAA+++ grade as well:

The loss won’t hit Erste’s regulatory capital to the full extent, and the bank’s common equity Tier 1 ratio will reach about 10 percent by the end of the year without raising fresh capital, Erste said. That’s because goodwill, brand value and other intangible assets of its Romanian unit that Erste is writing down aren’t part of the regulatory capital.

Which also goes to show just how ridiculous Europe's definitions of capital truly are.

As for Erste, it's ok - the stock has been punished and now it is time for the BTFD algos to lift it right back to where it was, because as has been made very clear in the past 6 years, fundamentals are no longer relevant or matter when making capital allocation decisions. The only thing that does matter is how much more of a moral hazard will the central banks push the system into before one day what happened to Erste today takes place at the global level, and the can containing the entire modern financial system which is broken beyond repair can no longer be kicked down the street.


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Fri, 07/04/2014 - 11:07 | 4924550 Eyeroller
Eyeroller's picture

Tick tock, tick tock.

Fri, 07/04/2014 - 11:14 | 4924567 MeMongo
MeMongo's picture

Better call Saul!

Fri, 07/04/2014 - 11:24 | 4924580 Arius
Arius's picture

I thought was just Greece ... kind of blaming on their lazyness and socialism...


it seems it is everybody the same ... why this debt thing???


Armstrong says this debt thing has been used countless times ... it seems every 40-50 years countries do the same thing ... but WHY?


are people by definition insane ... you know doing the same thing repeatdly and expecting different results or smt else is at play? 

Fri, 07/04/2014 - 11:42 | 4924637 Arius
Arius's picture

following up on this thought just occured to me ... but in finance humans can never get it together ... always making the same mistake with this debt system ... over and over and over again ...


Why?  it is the same people who have made amazing achievements in everything else discovering electricity, computers ... you name it ... still in finance they suck ... they seem to be insane by definition ....


 wondering....afer reading Armstrong and he really knows history ... especially financial history

Fri, 07/04/2014 - 11:54 | 4924658 IndyPat
IndyPat's picture

...always making the same mistake with this debt system...

Mistake. Keep thinking that.

If they "keep doing it" you better bet your sweet ass it's because it keeps fucking paying, boyo.

You can bank on that and only that.

Fri, 07/04/2014 - 12:08 | 4924675 Arius
Arius's picture

...because it keeps paying...


well, i would believe it if it was a few cases, but here is the whole world ... the same system ... over and over and over again .... for hunderds and hunders and hunderds of years. 


it seems very clear humans just suck at finance and then again they seem to be execelling at almost everything else ... going even to the Moon...yeah well,


read Armstrong and you will see what i am talking about ...

Fri, 07/04/2014 - 12:15 | 4924697 centerline
centerline's picture

Armstrong dances around the issues.

And, don't get me wrong.  I appreciate his work.

Cycles repeat because human nature never changes.  Concepts like Greshaw's Law always assert themselves (or say the invisible hand - Adam Smith).

What is part of the cycles is how sociopaths rise to power.  How power corrupts.

Of course it is in our very DNA to want more... we are programmed for growth.

Debt based systems simply reflect who we are.  That is why they keep popping up.

 Attempting to change the amplitude of effects is perhaps Martin's angle in saying we need to do something smarter - but really it isn't any different on the surface than all the other centralized attempts to squash the business cycle.  Where I agree with him is perhaps in a different place - that evolution requires pressure and we have the tools (technology) now to do better.  General education - not centralization.   

Fri, 07/04/2014 - 12:20 | 4924702 Arius
Arius's picture

"Debt based systems simply reflect who we are"


may be you right ... but, when you know how it will end WHY start at the benning, and it is not one country it is the WHOLE world and it seems doing it for ever with the hope of different result .... in my book this is INSANITY

Fri, 07/04/2014 - 12:34 | 4924723 BaBaBouy
BaBaBouy's picture

ReJoice And Give Thanks... "THEY" Pushesd GOLD Down Again Yesterday...

Fear NOT, Everything Is Just Fine In Bankster FED Fairyland,

With The Printers (To The .001% Chozen Few) At The READY.

Fri, 07/04/2014 - 13:52 | 4924918 Save_America1st
Save_America1st's picture

wow, their stock is cheaper than silver!  We should buy a bunch of it while it's on sale now!  Does it come in tubes of 20? 

Fri, 07/04/2014 - 13:58 | 4924933 svayambhu108
svayambhu108's picture

And how bad is this, given that, banks and bankers keep on falling ?

Fri, 07/04/2014 - 17:52 | 4925550 SafelyGraze
SafelyGraze's picture

2 trillion debt over there

2 trillion in excess reserves over here

net net -- all balanced

Fri, 07/04/2014 - 19:41 | 4925732 knukles
knukles's picture

Gas pipeline is gonna run through which country, again?

Fri, 07/04/2014 - 13:03 | 4924810 centerline
centerline's picture

Yup.  Is nuts for sure.

Fri, 07/04/2014 - 13:24 | 4924861 Troublehoff
Troublehoff's picture

Money supply has to expland exponentially

Productivity does not

The only way to make this equation work is to pile on more debt or more base money.

Either way, it's fucking inflationary 

If there's one thing you can count on, it's that the real value of cash and bonds is getting destroyed, default or not

Fri, 07/04/2014 - 14:20 | 4924991 logicalman
logicalman's picture

The people (psychopaths) that run the system benefit HUGELY, on the backs of Joe Public every time and run away with their loot when TSHTF

Not insane for them, is it?

The insane part is how humans allow the psychopaths take over every damn time.


Fri, 07/04/2014 - 12:39 | 4924749 Citxmech
Citxmech's picture

"Debt-based systems simply reflect who we are."

Honestly, I think each broad-based monetary system has benefits and pitfalls.

A fixed monetary system (like gold - which worked pretty well for a very long time) invites currency deflation as population and growth increase and scarce resources are used-up.  Also, balance of trade issues can lead to catastrophic imbalances in the currency supply of net importers.

An expansionary monetary system tries, at least, to match growth and create stable pricing.  The problem here is how do you manage it?  Central control has obvious problems, but leaving it up to the market by using a debt-based system REQUIRES exponential growth (ie eventual failure is baked into the cake).  Then, of course, there is the greed of the issuers that must be dealt with.

If you want to facilitate maximum growth and utilization of resources (which can be viewed as both a virtue, or a cancer) the debt-based system makes initial sense - especially when its certain and eventual failure seems so far away.

At humanity's current stage, where population is slamming into resource limits, however, debt-based fiat it is at its failure point.  Under these circumstances, a zero-growth, or better yet, a system that will function in a contracting market will need to be transitioned to, if any semblance of stability is to be maintained.

Fri, 07/04/2014 - 12:52 | 4924773 max2205
max2205's picture

-20%, that's a good start

Fri, 07/04/2014 - 13:08 | 4924828 centerline
centerline's picture

Solid post C.  There is no utopia and the current system is toast.  Even the mechanics of debt are turning the tide regarding demographics.  Hand in hand with resources, social complexity, you name it.  A pefect storm for a debt based system - globally.  And the powerful are going to drag us to hell trying to keep the party going for themselves.

Fri, 07/04/2014 - 13:26 | 4924866 Troublehoff
Troublehoff's picture

Under these circumstances, a zero-growth, or better yet, a system that will function in a contracting market will need to be transitioned to, if any semblance of stability is to be maintained.

Great point!

Only problem with that system is that it makes it hard for people in power to steal from everyone else. Rich people might loose money in that system.

Fri, 07/04/2014 - 14:31 | 4925016 Bananamerican
Bananamerican's picture

Oh they're "loosing" money all right but they're fighting a "losing" battle in doing so.

Fri, 07/04/2014 - 14:55 | 4925069 Maxter
Maxter's picture

Nice post and I agree with you.

I just wanted to point out that the exponetial grow would be slower if we let the TBTF bank actualy fail.

Fri, 07/04/2014 - 20:15 | 4925776 Urban Redneck
Urban Redneck's picture

We are morally weak and easily corrupted, but going all the way back to the Stoics- even strong leaders have been led into temptation...

in 161 AD Upon becoming Grand Poobah - Marcus Aurelius reduced the silver content of the denarius from 2.68 grams to 2.57 grams to finance his shovel ready spending spree...

in 168 AD Marcus Aurelius increased the silver content of the denarius from 2.57 grams to 2.67 grams. (THINK ABOUT THAT...)

in 170 AD Marcus Aurelius reduced the silver content of the denarius 2.67grams to 2.57 grams (because fighting those damn Germans was draining his treasury and he needed more coins)

in 180 AD Marcus Aurelius croaked and Commodus became Grand Poobah and promptly rinsed his hands of Marcus Aurelius and repeated his predecessor's devaluation for his own shovel ready spending spree, this time to 2.34 grams

The "shovel-ready spending/jobs program" basically Rinses & Repeats with each Roman Emperor. Spending money to reduce the money supply... not so much (read never).

no debt was harmed (or issued) in this demonstration

Fri, 07/04/2014 - 17:59 | 4925563 Urban Redneck
Urban Redneck's picture

It's not DEBT (that's a different problem)

It is the failure to CLEAR & SETTLE that throws another coin in the great RINSE, REPEAT machine.

Smart people keep reinventing the "flexibility" wheel to address this, but these same smart people consistently neglect to incorporate mean reversion/counter-cyclicality/responsibility into their reinvented wheel, and thus the cycle continues...

"They" are smart people, and they know they can get away with it, and no one stops them, either because they don't understand the inevitable consequence of the engineering, or they are bought off.

Fri, 07/04/2014 - 12:18 | 4924699 CrazyCooter
CrazyCooter's picture

Are you a bot?

That is the oddest prose I think I have ever seen (three post sample). Each paragraph is this disjointed idea, not really logically strung together, echoing the same sort of stuff (e.g. you cite "Armstrong" in every post.

If you really want to learn shit, go the the front page, scroll to the bottom, find the links to go to the previous page of posts (e.g. 1 2 3 4 5 6 7 8 9 … next › last ») and choose the "last" option.

Start reading in chronological order towards the present.

When you finally catch up with us, you won't ask dumb questions, you will post brillian sarcasm (or that weird off-beat humor like Knuckles or slewie the pi-rat). After all, once you figure out what is really going on you will need a coping mechanism that works for you.

And I suspect you willl have dropped yoru Armstrong fetish by then.

Carry on.



Fri, 07/04/2014 - 12:23 | 4924708 Arius
Arius's picture

i think is an important thing to discuss, thats why i tried to improve it each time ... i

t just struck me as odd thats all that people will do the same thing over and over.


you acceot this as normal business?


if that was the case, people would have been stuck in other areas and we would never had these amazing discoveries ...


armstrong it is just someone i respect for his knowledge ... i take it back


Fri, 07/04/2014 - 12:36 | 4924741 IndyPat
IndyPat's picture

The simple conclusion is that it keeps working for "the few".
Every. Single. Time.

It's in really bad taste to name "the few", but if you are honest with yourself after researching it, don't state your conclusions here.

We get away with a lot here. But there were a few that found the boundaries of our little play pen.

His name was.....

Fri, 07/04/2014 - 16:52 | 4925397 Luckhasit
Luckhasit's picture

I don't know individual names, but Italy with a certain group of people was the birth of it all. 


Fri, 07/04/2014 - 14:22 | 4924999 logicalman
logicalman's picture

Coping mechanism - AKA Beer!

Fri, 07/04/2014 - 12:31 | 4924725 IANAE
IANAE's picture

Many believe they are experts oddsmakers when in fact they do not understand the games or attendant risk.


Should not wager unless they have an edge...most people calculate their edge ("...what's that?") inaccurately, if at all.


The pros, however, know very well what their edge is...

Fri, 07/04/2014 - 13:06 | 4924822 IndyPat
IndyPat's picture

...the magic crystals in their blood from their mothers side of the "family"?
Am I right? Am I right?

Fri, 07/04/2014 - 13:19 | 4924853 Dublinmick
Dublinmick's picture

"the magic crystals in their blood from their mothers side of the "family"

Best laugh I have had in awhile Pat, Thanks

Fri, 07/04/2014 - 14:27 | 4924876 IndyPat
IndyPat's picture

From one mick donkey motherfucker to another...
You're most welcome and always glad to help.

Edit: big fan of your blog, btw. Still crawling the old stuff, but I'll get up to speed soon.

Fri, 07/04/2014 - 13:37 | 4924889 TVP
TVP's picture

The cycle repeats throughout history because naive, sheep-like humans such as yourself cannot see through the illusions created by the handful of elites who rule over us all.  They use illusions to keep the masses subdued, while they usurp and control all capital created by the producers of society in order to achieve easy power and wealth.  


It's all by DESIGN, they BUILD IT UP, only to later BURN IT BACK DOWN.


Anyone who trades anything knows that a CRASH is always welcomed by the biggest players in the game....because it means they can swoop up ALL assets for PENNIES on the dollar. It's not a goddamned CONSPIRACY, it's just REALITY.

Fri, 07/04/2014 - 12:04 | 4924677 COSMOS
COSMOS's picture

This is why the Austrians need cheap Russian gas via South Stream, any savings they can create will need to go to bail out their banks.

Fri, 07/04/2014 - 12:24 | 4924709 CrazyCooter
CrazyCooter's picture

While I am sure this is unrelated, it *IS* Hungary and Austria rocking the boat. I wonder just a bit if there isn't some serious shit going on behind the scenes.

After all, any group of banks in any country can theoretically sink the whole system just by pulling down their pants for all to see. Sure, their banks will take a hit, but it could well bring it all down too.

Maybe this is what Hollande should have done, "Oh, you want to fine/blackmail us. Fine. Tomorrow we go public with our balance sheets." The voice on the other end would reply, "Well, that is hasty and illogical. Perhaps if we .... instead?"



Fri, 07/04/2014 - 13:47 | 4924903 booboo
booboo's picture

My thoughts exactly

Fri, 07/04/2014 - 14:55 | 4925068 COSMOS
COSMOS's picture

Someones pants will fall eventually even if by mistake, rubber bands last only so long...

Sat, 07/05/2014 - 00:41 | 4926062 Tabarnaque
Tabarnaque's picture

Funny, I was thinking the same. What a strange coincidence that this is happening shortly after Austria approved the construction of Russian’s South Stream Nat Gas pipeline… And this is supposedly coming from tighter regulations out of Hungary and Romania?!! That smells fishy.

Fri, 07/04/2014 - 14:08 | 4924958 shovelhead
shovelhead's picture

"I'm too smart to get stuck.

That's for the dummies."

I used see it all the time when I played poker.

Sometimes I was the dummy.

Gambling is like that.

Fri, 07/04/2014 - 12:01 | 4924664 Manthong
Manthong's picture

God forbid reality should take hold anywhere.

Fri, 07/04/2014 - 12:45 | 4924759 Citxmech
Citxmech's picture

"Reality" is going to be a gigantic kick in the balls for everybody.  

We are all Wile E. Coyote, Super-Genius.

Fri, 07/04/2014 - 12:22 | 4924704 Antifaschistische
Antifaschistische's picture

I know I'll gain a nice collection of dis-arrows for this...

But, thanks to the ability to short sell and buy puts...the .0001% who knew this information (in advance) and knew it was going to tank the stock price were still able to make a fortune off the headline.

I'm no expert in market mechanics, but if it's wrong for the FED to invent dollars through just seems that brokers who invent stock through short sales are equally as wrong.   None of which seems so bad, until the .0001%'ers make tens/hundreds of millions of dollars on either side of the news.

Fri, 07/04/2014 - 12:28 | 4924719 IndyPat
IndyPat's picture

Dunno who would junk that?
Looks like ya got the tiger by the balls.

Fri, 07/04/2014 - 12:34 | 4924733 CrazyCooter
CrazyCooter's picture

I sort of figured that out when I read Jessie Livermore's autobiography. It really demonstrated how the "inside class" uses stocks to screw the "outside class". No other demarcation fits; your an insider or your an outsider. Sophisticated hedgefunds simply work to become insiders (like banging a certain ex-President's daughter). Think that stinky hasn't generated some primo investment ideas?

If outside folks can get trends right, they can ride the ride and make a return. And maybe that works when the economy is generally expanding, growing, industries are innovating, etc. But all the land on the Earth is camped by people now; nothing new to explore. All the giant/supergiant oil fields have been found (oil discoveries peaked in the 60s). Et cetra.

At this juncture, I would rather take my dough and establish a business I think could actually survive over the long haul and gamble on my retirement htat way. Everything I put into a retirement fund will either be stolen outright or inflated to toilet paper. That includes not just stocks, but simple bank accounts with deposits greater than a month of rent/food/gas/etc.

Best of luck trading against the insiders. 



Fri, 07/04/2014 - 13:13 | 4924833 centerline
centerline's picture

Worse is that calling it a casino seems so normal. That says enough for me.

Fri, 07/04/2014 - 13:22 | 4924858 Dublinmick
Dublinmick's picture

Sounds about right to me, I went through the FSU business school and nobody ever bothered pointing out to me the fed was not federal. What could I possibly know?

Fri, 07/04/2014 - 13:28 | 4924869 IndyPat
IndyPat's picture

Silly rabbit. Of course it's Federal. Says so right in the name. It's would be like...I dunno..against the law for them to claim Federal status and not be.
And really sneaky and underhanded.

Fri, 07/04/2014 - 14:27 | 4925010 logicalman
logicalman's picture

Paraphrasing a bit here, but Henry Ford said putting money on a horse does not make it faster or stronger and the same applies to companies when people buy stock in it.

Brokers get their name from the likelyhood you'll be broker after you listen to them.


Fri, 07/04/2014 - 14:30 | 4925014 IndyPat
IndyPat's picture

..Ford said putting money on a horse does not make it faster or stronger and the same applies to companies when people buy stock in it...

I think he bet Nazi, as well. Still undecided if it was a winning bet.
I know it was a lucrative one, though.

Sat, 07/05/2014 - 01:42 | 4926105 paddyirishman
paddyirishman's picture

shut up hasbara throll, you're on the side of the anti Christ.

Fri, 07/04/2014 - 14:57 | 4925075 COSMOS
COSMOS's picture

LOL so true, I am thinking of changing my handle to FEDERAL BROKER :)))))

Fri, 07/04/2014 - 12:43 | 4924755 just-my-opinion
just-my-opinion's picture

Don't forget...yada...yada...yada


Fri, 07/04/2014 - 11:29 | 4924609 IndyPat
IndyPat's picture

Somebody say mine name? You didn't talk to those regulators did you?

Quick! Put a gold coin in my shirt pocket.

Fri, 07/04/2014 - 12:45 | 4924761 just-my-opinion
just-my-opinion's picture

You must not own a boat...8^)


Fri, 07/04/2014 - 13:04 | 4924815 IndyPat
IndyPat's picture

I don't. Best I could muster in a pinch was a leaky canoe...and it sank...tragically.
A few of my clients own an old RV and they swear is the goose that lays golden eggs.
I believe them. Best clients ever, next to my chicken restaurant franchise client.

Fri, 07/04/2014 - 15:00 | 4925084 COSMOS
COSMOS's picture

Who needs a boat when he has a selfmade log raft, it was his first and most prized one, sad he lost it.

Fri, 07/04/2014 - 11:33 | 4924619 Da Yooper
Da Yooper's picture

Oy vey

vhen are dey going to learn

dhey ran out of other peoples



Fri, 07/04/2014 - 12:57 | 4924785 just-my-opinion
just-my-opinion's picture

Plus one....for Oy Vey


Fri, 07/04/2014 - 11:40 | 4924625 stoneworker
stoneworker's picture

It's all good man....Putin to Obama...stay out of my territory and stares at him with those steely blue eyes.

Fri, 07/04/2014 - 15:16 | 4925118 tony wilson
tony wilson's picture

saul is not around at the mo.

how about lord roth.

lord edwyn is very pissed off with these austrian nazis.

this is just a taster forget about putniks gas pipe actuality and focus on printing money paper for jewish royalty.

you know it makes sense.

Fri, 07/04/2014 - 13:59 | 4924936 just-my-opinion
just-my-opinion's picture watch stopped ticken


Fri, 07/04/2014 - 15:58 | 4925247 Buck Johnson
Buck Johnson's picture

Goes to show how much bad debt is hidng right under the surface of the world economy.  When this monster breaks surface, it will be Godzilla in proportion.

Fri, 07/04/2014 - 19:07 | 4925667 zerocash
zerocash's picture

Kredit Anstalt revisited.

Fri, 07/04/2014 - 11:07 | 4924553 Al Huxley
Al Huxley's picture

This oughta trigger some strong words from Draghi!  I'm surprised shareholders would panic and dump the stock, when it's only a matter of time before Draghi 'says some stuff' and resolves the whole situation.  I guess some people just aren't used to living in a world run by all-powerful wizard central bankers with the power to resolve all the worlds problems through magic words.

Fri, 07/04/2014 - 11:20 | 4924585 Arius
Arius's picture

BTFD ... tomorrow is a new day and next week "investors" will buy the deeply discounted debt ... me thinks, but what do i know ...

Fri, 07/04/2014 - 11:23 | 4924588 Ghordius
Ghordius's picture

some powerful words from Draghi? what do you think the man is, a "word-bazooka"? capable to change things with words only? oh, wait... nevermind...

"Ironically, it is the poor Eastern European sovereigns themselves who are forcing banks to do what is effectively is the job of their regulator, the ECB. Needless to say, the last thing the ECB will do is force banks to clean up their balance sheets"

it's not that ironic, more a logic from national regulators who were in charge and allowed Poles, Hungarians and others to take loans and in particular mortgages in EUR and - gasp! - CHF. at that time nobody complained (well, I was grumbling)

to repeat: at that time, the regulators in charge were national. the liberal "free trade" logic was that the customer knows best (caveat emptor). they allowed borrowing in EUR and CHF for the masses - in countries that still have their national currencies. you know, freedom. btw, this happened in Iceland, too. later, those were seen as "unjust", and both Hungary and Poland did some things about it which bankers are still smarting about

now - in September, if I remember right - the ECB is in charge. but only for the biggest banks involved in several countries. nobody has a clue what the ECB will do, but it's known that it will start with stress tests. saying now that the ECB will not force banks to clean up their balance sheet smacks me as premature. and very strongly as something taken out of the monetary and banking history of the US and UK, not the european continent. example: Sweden, in the '90s

Fri, 07/04/2014 - 13:52 | 4924919 MrSteve
MrSteve's picture

Little Johnny, can you use the word BAZOOKAS with its European-nuanced meaning in a sentence?

Sure I can: Rachel Welch was sporting a fine pair of bazookas in her first full-length Hollywood film!

B A Z O O K A S ! !

Fri, 07/04/2014 - 11:26 | 4924604 DeadFred
DeadFred's picture

Strong words for sure! What kind of terrorists were these guys to pass such laws?

Fri, 07/04/2014 - 11:33 | 4924620 G.O.O.D
G.O.O.D's picture

Well I must confess, i should never have sold those assholes that magic wand. It is all my fault guys, and gals, and NSA bots, and Trolls and .gov paid shills, and all the rest of the things reading/posting/logging/managing/the thoughts and expressions on this.. oh fvk it. I AM SORRY OK? Shit .. Yukon Jack makes a great breakfast drink...

Fri, 07/04/2014 - 13:30 | 4924874 MeMongo
MeMongo's picture

So does the ole Jimmy Beam:-)

Fri, 07/04/2014 - 11:38 | 4924629 Ghordius
Ghordius's picture

"Which also goes to show just how ridiculous Europe's definitions of capital truly are"

you mean the international Basel III definitions?

as I won't tire to explain, the typical european bank's balance sheet is different from the typical US/UK bank

they have way more direct/business loans to what the economy really is, in the eurozone: the small and medium enterprises (in full private/personal ownership)

so they contain things which Anglo American banks only let pass through, via securitization, bonds and stocks/IPOs

and so a regulator will accept a higher leverage, because it's more of the "good things" and the "bad things" all mixed together like some of the CDOs which the others produced and for long time nobody knew what they contained

and unraveling that kind of balance sheet needs... time. in the same way as markets had to wait for the "resolution" of some of those CDOs

Fri, 07/04/2014 - 12:45 | 4924763 CrazyCooter
CrazyCooter's picture

You are correct Al, *BUT* only if Austia isn't thinking they might be the first to defect and buddy up with Russia.

Given the recent news regarding SouthStream, Austria may have been threatened bluntly behind the scenes, so they played hardball and threatened to take down the whole banking system but showing "just a a little bit" of rot.

First to defect in this situation gets the best deal (even if still shitty) and I bet Russia is making very favorable overtures.

It is becoming more and more clear to me that Europe is coming apart and it can only stay together if the banking-debt circle jerk stays unbroken. I think that is what this is about.



Fri, 07/04/2014 - 11:08 | 4924555 fonzannoon
fonzannoon's picture

I think we really need to start redifining the term crash around here. I say we use a 50% drop as "crash". Thie move on that chart qualifies as your typical btfd.

Fri, 07/04/2014 - 11:48 | 4924646 Aaaarghh
Aaaarghh's picture

agreed. And when it does happen, we will all have the equivalent feeling of having a damn good shit.

The financial system is constipated with bad debt and needs an enema!

Fri, 07/04/2014 - 12:06 | 4924679 Winston Churchill
Winston Churchill's picture

The corpse will have a final bowel evacuation before burial.

The patient has only been kept 'alive' by artificial means since 2008.

Way past an enema at this stage.Call the mortician and organize the wake.

Fri, 07/04/2014 - 12:24 | 4924707 IndyPat
IndyPat's picture


They made hay for what? 12 years while Ol' Spooky Bin Ladin was a pop cycle in some DOD cryo tube. And he still had use, post thaw.

This corpse can dance around like Bernie a while longer....and still be useful once truly dead. It's just mostly dead.


Fri, 07/04/2014 - 12:46 | 4924765 Citxmech
Citxmech's picture

+1 for the Bernie economy referance.

Fri, 07/04/2014 - 14:46 | 4925045 Deathrips
Deathrips's picture

wonder who made the first bernie comparison.....ummm...who was it now?



Fri, 07/04/2014 - 19:44 | 4925738 shovelhead
shovelhead's picture

Manual Disimpaction.

Fri, 07/04/2014 - 11:50 | 4924653 RockyRacoon
RockyRacoon's picture

I say goes to ZERO as a crash.  But what do I know... I'm just an ignorant raccoon with no money in that game anyhow.  It's fun to sit on the sidelines and watch the action.   Gotta run out and buy some more popcorn....

Fri, 07/04/2014 - 12:03 | 4924676 Al Huxley
Al Huxley's picture

No way man, I think you've got it completely backwards.  In these modern days with central banker wizards roaming the earth, spreading their magic and incantations and bringing security and comfort to all (and by 'all' I mean the top .01% of the population), I think we need to define a 'crash' as any case where the close is lower than the open, and then the following day open is lower than that prior day close.  This applies to the indexes and also to every individual equity that trades on the exchanges (with the exception of the mining stocks, which have their own rules). 

And let me tell you, having been on the wrong side of some of these crashes, it can take a long time to recover from them - up to 6 hours in many cases, so they're not to be treated lightly.

Fri, 07/04/2014 - 12:14 | 4924693 Fuh Querada
Fuh Querada's picture

ZH headings are getting as misleading as the KWN ones
click bait and lots of fillers

Fri, 07/04/2014 - 14:15 | 4924981 Monty Burns
Monty Burns's picture

Yeah, when I saw the headline I thought the bank had gone into liquidation.

Fri, 07/04/2014 - 11:12 | 4924562 Dan The Man
Dan The Man's picture
Bank Crashes After Revealing

Its the "after revealing" part that is so frustrating.  Theyre probably ALL bad ALL the time...but the shafting is only AFTER REVEALING

Fri, 07/04/2014 - 11:13 | 4924564 G.O.O.D
G.O.O.D's picture

I gota my ass to Wellsfargo and withdraw my 12 dollars and 19 cents before the run!

Fri, 07/04/2014 - 12:07 | 4924683 loonyleft
loonyleft's picture
All right, G.O.O.D, how much do you need?  twelve dollars and 19 cents.
Aw, G.O.O.D, just enough to tide you over till the bank reopens. I'll take twelve dollars and 19 cents.
- There you are. - That'll close my account. Your account's still here. That's a loan.
Fri, 07/04/2014 - 12:15 | 4924696 G.O.O.D
G.O.O.D's picture

A loan you say? @ 39.8% per week? Wow what a deal! I was starting to sweat the idea of being broke for a second. Thanks for  saving me , hate for the neighbors to think I might be having financial dif .  It is all about image these days, ya know?

Fri, 07/04/2014 - 12:53 | 4924775 IndyPat
IndyPat's picture

If that excites you, wait til you see the monthly transaction fees, low balance fees and the "my ugly JAP daughter needs braces" so I'll call it a weekly "maintenance fee" fee.

Fri, 07/04/2014 - 13:15 | 4924838 G.O.O.D
G.O.O.D's picture

Thank God for  looking out for my best interest. Last 401k I had, they charged me 18 dollars in fees to lose me 33 dollars over 6 months. Another great deal from the money changers.

Fri, 07/04/2014 - 13:23 | 4924860 IndyPat
IndyPat's picture

The real fun comes when you drain that 401K.
I was literally screaming into the phone "cut the fucking check and give my fucking money you twat". They did after taking a hefty munch out of it,
Oh was that fun...but less painful than "donating" it to my "country's" ailing economy.
That kinda sore ass never goes away.

Fri, 07/04/2014 - 13:50 | 4924908 G.O.O.D
G.O.O.D's picture

Lol I hear that. I waited for 6 months after I quit that shitbag out fit and took matters into my own hands and like the true genius that I am I bought silver. NOW, I just purchased a bullet mold so i can use this worthless shit to shoot werewolves.

Fri, 07/04/2014 - 13:58 | 4924925 IndyPat
IndyPat's picture

Shame that only silver works.
But what the hell, I care to send the very best.
I bought silver with what remained of my "retirement"...that's the only thing I feel good about. I won't say what spot was when I did it.
Don't wanna rub it in on those late to the party.
But, with the taxes and's close to a wash at today's spot...and maybe over if you think today's spot is pure poop. And I do.

Fri, 07/04/2014 - 11:13 | 4924565 TheReplacement
TheReplacement's picture

This has absolutely nothing to do with Russian gas/oil pipelines, pinky swear.

Fri, 07/04/2014 - 11:24 | 4924596 aardwolf
aardwolf's picture








Fri, 07/04/2014 - 11:30 | 4924612 centerline
centerline's picture

WWIII starts with banking.  Same as WWII.

Fri, 07/04/2014 - 12:59 | 4924789 just-my-opinion
just-my-opinion's picture

When you forget what war is want war


Fri, 07/04/2014 - 13:52 | 4924917 just-my-opinion
just-my-opinion's picture

Happy 4th everyone


Fri, 07/04/2014 - 13:53 | 4924922 just-my-opinion
just-my-opinion's picture

Happy 4th everyone


Fri, 07/04/2014 - 13:53 | 4924923 just-my-opinion
just-my-opinion's picture

Happy 4th everyone


Fri, 07/04/2014 - 11:37 | 4924626 G.O.O.D
G.O.O.D's picture

You better shut your piehole if you know whats good for you-you pumpkin pie haircutted freak.

Fri, 07/04/2014 - 13:49 | 4924907 just-my-opinion
just-my-opinion's picture

Shut the front door.....toughf...guy

Sat, 07/05/2014 - 07:39 | 4926226 doctor10
doctor10's picture

For these bank crashy thingys to work like they want them to -enough people have to have enough money in them is order for the fuse to properly light. Otherwises it just fizzles-or sumpin'.

I think that's why Puty-Poot is still breathing-and basically nobody else on the planet gives a shit.

Fri, 07/04/2014 - 11:31 | 4924615 IndyPat
IndyPat's picture

Beat me to it.
Couldn't even wait a bit for it to be less obvious.
More "sanctions"....

Long Bosch Nail Guns and breezy 50 story balconies.

Fri, 07/04/2014 - 11:13 | 4924566 Squid Viscous
Squid Viscous's picture

Get to work, Mr. Draghi... time to fire up the Euro printers

Fri, 07/04/2014 - 11:25 | 4924602 Ghordius
Ghordius's picture

you wish. the ECB balance sheet is shrinking. not that you are supposed to notice

Fri, 07/04/2014 - 11:16 | 4924573 buzzsaw99
buzzsaw99's picture

romania is the beacon of truth, justice, and the capitalist way. how funny.

Fri, 07/04/2014 - 11:37 | 4924628 ThirdWorldDude
ThirdWorldDude's picture

USA is the beacon of truth, justice, and the capitalist way. how funny.


Look buzz, it works the other way 'round too...  ;)

Fri, 07/04/2014 - 11:22 | 4924574 Cacete de Ouro
Cacete de Ouro's picture

Speaking of Austria, how about some nice Austrian Gold Philharmonics?

These coins are legal tender coins in the EU since they are Euro coins with a Euro face value. This means that you can carry them in and out of the EU in your pocket and EU customs agents cannot say anything.

Fri, 07/04/2014 - 11:29 | 4924610 Ghordius
Ghordius's picture

they are nice. yet I was not aware on any "coins" or "face values" restrictions in the eurozone. in fact, gold was always welcome, here. even during the US Gold Prohibition of 1934-1974. thousands of "we buy gold!" shops in the eurozone

Fri, 07/04/2014 - 11:57 | 4924663 IndyPat
IndyPat's picture

Did not know that.
I guess a "you're welcome" is in order.

Fri, 07/04/2014 - 17:32 | 4925495 Hongcha
Hongcha's picture

Gold Buffaloes, 1 oz. .999

Amerika still makes the best coins.  And the best cannabis 'produce.'

So we got that, which is nice.

Fri, 07/04/2014 - 12:09 | 4924681 Fuh Querada
Fuh Querada's picture

sorry to disappoint you but on entering the EU with such coins, customs assesses them at their market value. Anything above eur 10 000 has to be declared. I agree they are pretty though, I have a few myself.

Fri, 07/04/2014 - 12:14 | 4924694 Ghordius
Ghordius's picture

declared, yes. but besides declaring, is there anything else? that declaration thing is even on cash, of any denomination. nosy, yes

Fri, 07/04/2014 - 14:40 | 4924732 Fuh Querada
Fuh Querada's picture


Fri, 07/04/2014 - 11:19 | 4924579 Eugend66
Eugend66's picture

Sooo .. South Stereaming gets expensive, huh? May the PTB rot in hell, because the producers will not fall to Nudelman-ism.

Fri, 07/04/2014 - 11:20 | 4924583 bugs_
bugs_'s picture

big things start in Austria

Fri, 07/04/2014 - 11:32 | 4924617 falak pema
falak pema's picture

they invented the croissant and the sachertorte.

Fri, 07/04/2014 - 11:39 | 4924631 ThirdWorldDude
ThirdWorldDude's picture

Don't forget Kreditanstalt, Austrians built that as well.

Fri, 07/04/2014 - 12:38 | 4924651 Oldrepublic
Oldrepublic's picture

The bankruptcy of that bank in 1931  helped start the great depression

Fri, 07/04/2014 - 11:43 | 4924642 Ghordius
Ghordius's picture

the croissant is supposed to be a Turkish half-moon, and legend says it's so to remember that the Turkish armies were vanquished at the gates of Vienna

with the help of the dreaded Polish Lancers, which were the "tanks of that age" (which led to all the legends of Polish lancers attacking German tanks)

and the Polish Lancers used swan's wings on their backs, making them in full charge a very... apocalyptic vision

Fri, 07/04/2014 - 11:53 | 4924657 falak pema
falak pema's picture

they were vanquished twice... fortunately the Vienna pastry makers had the good taste not to make the croissant into a full moon! 

No wonder so many Poles wear red cardinal's hats like bats out of hell and like to walk the corridors of the Vatican; apocalyptic place which M. Angelo decorated for Pole dancers impaled on day of last judgement! 

Fri, 07/04/2014 - 12:06 | 4924680 Ghordius
Ghordius's picture

but the Turks had their economic revenge. they left coffee, in their camps. and the Viennese were immediately hooked. which led to brisk trade for the Ottoman Empire

Fri, 07/04/2014 - 11:55 | 4924660 Arius
Arius's picture

i'll remember it ... and will start eating a croissant once in awhile ...

Fri, 07/04/2014 - 12:00 | 4924669 IndyPat
IndyPat's picture

Word up.
Me too.
But I'm still drawing the line @ soccer and Nutella. And tea.

Fri, 07/04/2014 - 13:01 | 4924802 CrazyCooter
CrazyCooter's picture

The only time I eat Nutella is on lightly toasted sourdough (whole loaf - sliced to my preferred thickness) with a touch of butter, almond butter, Nutella, and a little sriracha on top (layered in order listed). The whole thing should be warm or better for the best effect.

Sriracha goes very well with chocolate flavors. My favorite VN food join in Dallas, TX (Mai's - rough neighborhood but amazing food) has this peanut sauce they serve with spring rolls. I am convinced they put Nutella in it (or an equivalent) and I always put Sambal Oelek on top. Once I moved north, I approximated the flavors as best I could and the above is as close as I can get.

I have never been able to repro that peanut sauce - but I keep trying!



Fri, 07/04/2014 - 13:15 | 4924836 IndyPat
IndyPat's picture


Thai chicken satay w/ peanut sauce is like catnip for me.
If they've been sneaking Nutella in that sauce, I've got some horizons to broaden.

Fri, 07/04/2014 - 11:21 | 4924587 Smegley Wanxalot
Smegley Wanxalot's picture

This whole problem can be solved by confiscating the savings of the serfs and giving it to the banks.

I need a job at the IMF.

Fri, 07/04/2014 - 13:03 | 4924811 CrazyCooter
CrazyCooter's picture

Yeah, like giving piles of cash to a high maintenance young girlfriend!

A'int nothing being solved.



Fri, 07/04/2014 - 11:22 | 4924589 praps
praps's picture

It's Creditanstallt all over again.

Fri, 07/04/2014 - 11:24 | 4924598 IridiumRebel
IridiumRebel's picture

That's the first thing I thought but then remembered their toolbox of fuckery is larger.

Fri, 07/04/2014 - 14:35 | 4925022 _ConanTheLibert...
_ConanTheLibertarian_'s picture

I just read the Wikipedia article about CA. So Hitler was right about the Jews after all?

Fri, 07/04/2014 - 11:22 | 4924592 Son of Loki
Son of Loki's picture

“These announcements hurt the management’s credibility going forward."


Ha Ha Ha! Give them all the usual Multi-Million dollar bonus and a promotion like they do in Merika.

Fri, 07/04/2014 - 11:27 | 4924605 Atomizer
Atomizer's picture

Another bank gone tit's up.


Fri, 07/04/2014 - 11:27 | 4924608 centerline
centerline's picture

Yeah, these sociopaths are thinking what is needed is some sort of jump to what they percieve as a higher economic steady state.  The question here is whether or not they realize such requires pounding the vast majority of the population into a Hunger Games sort of world.  Unlike Martin Armstrong, I wager they do know.  The proverbial "barbarians" are at the gate - balance of power in the world is in play.  So, we have a regular economic Mexican standoff going on.



Fri, 07/04/2014 - 11:30 | 4924613 Debugas
Debugas's picture

what a name - "Erste bank" which translates as "First bank"

is it going to be the first one in a long long line of these zombies falling out ?

Fri, 07/04/2014 - 13:06 | 4924818 CrazyCooter
CrazyCooter's picture

When I was a kid I always noticed that banks were always "first" something or another and I wanted to start a bank and be the "second" something or another.



Fri, 07/04/2014 - 13:37 | 4924890 MrSteve
MrSteve's picture

Cincinnatti's Fifth Third Bank is your prototype!

Sat, 07/05/2014 - 07:43 | 4926227 doctor10
doctor10's picture

HehHeh-look at this outfit!!

Fri, 07/04/2014 - 11:30 | 4924614 spacehedgie
spacehedgie's picture

Østjydske Bank -36% today. Take that Erste (-16%), you are only Zweite today!

Fri, 07/04/2014 - 11:32 | 4924616 NoWayJose
NoWayJose's picture

Interesting 'update'. Since when does the 'Banking Asdociation' and 'banks' get to tell a sovereign country what to do? Errrr, never mind...

Fri, 07/04/2014 - 11:34 | 4924618 Dr_D
Dr_D's picture

Actually not recognizing goodwill as regulatory capital is prudent, not ridiculous and it is not different from the US or UK. You could make a similar argument on deferred tax assets, which are eligible to some extent, but that would destroy the French banks among others..

Other than for Erste's shareholders and its management, which might be sacked any time, this is not a big deal. Erste has rock solid operations in Austria, the Czech Republic and Slovakia, but has issues in Romania, Hungary and Croatia which are in total much smaller than the beforementioned. And I am speaking from within a competitor of Erste..

Fri, 07/04/2014 - 11:41 | 4924636 IndyPat
IndyPat's picture

....which might be sacked any time, this is not a big deal....

You keep saying that word, "sacked". I don't think it means what you think it means.

Fri, 07/04/2014 - 13:08 | 4924829 CrazyCooter
CrazyCooter's picture

Proper sacking starts at 2:05 ...



Fri, 07/04/2014 - 11:40 | 4924633 rtalcott
rtalcott's picture

Don't take it too seriously...or this could happen:

Dad Gets Brain Injury From Headbanging to Motörhead

"We are not against headbanging," Dr. Ariyan Pirayesh Islamian, one of the man's doctors, told theAssociated Press. "The risk of injury is very, very low. But I think if (our patient) had (gone) to a classical concert, this would not have happened." 


Fri, 07/04/2014 - 11:43 | 4924643 IndyPat
IndyPat's picture

Or just enjoyed a long boring game for faggy assed soccer.

Now I see clearly.

Because fuck that.....Gimme more Lemmy!

Fri, 07/04/2014 - 11:48 | 4924650 G.O.O.D
G.O.O.D's picture

Those faggedy assed soccer fans is what will give you the drain bamage.

Fri, 07/04/2014 - 12:12 | 4924692 IndyPat
IndyPat's picture

Exactly, home boy. Enjoy your circus. But whatever you do, don't stop rooting for "your team" and pay no mind to the theft of your wealth and sovereignty. You won't miss the freedom bit, cause none of you ever had it.
Loyal subjects to whatever local inbred had the fanciest hat or chair or castle.
Stings a bit, huh?
Drain Bamage, indeed and ball-less to boot.

Fri, 07/04/2014 - 12:18 | 4924700 G.O.O.D
G.O.O.D's picture

Has that 2x4 always been up your ass, or is that a new addition?

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