European Banks Are In Trouble

Tyler Durden's picture

With Austrian bank contagion impacting European stocks on Friday, we thought it worth a look at the 'recovering-out-of-the-crisis-all-is-well-and-stress-tests-will-prove-it' European banks. It appears, having bid with both hands and feet for Europe's peripheral debt - thus solidifying the very sovereign-financial-system linkages that were the cause of the European crisis contagion - Europe's banks had the jam stolen from their donuts when Mario Draghi did not unveil a massive bond-buying scheme (by which they could offload their modestly haircut collateral at 100c on the euro, raise cash, take profits, and all live happily ever after). A TLTRO is no use to the banks who now know even the first sign of one dumping his domestic bonds will cause this illiquid monstrosity to collapse under its own weight. It is clear - as the following chart shows - that investors are quickly coming to that realization and exiting European bonds in a hurry.


Since Draghi failed to unveil QE, European banks have collapsed to one-year lows relative to world banks...


Of course, some knife-catching Bill-Miller-ite will come to the rescue, buying-the-dip - but as BNP's Ian Richards notes,  

"The prospect of supporting material credit growth and better earnings revisions in the banking sector is further down the line than the market had hoped.”

Source: Bloomberg

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DirkDiggler11's picture

No Bullshit around here, Tyler lays it out there matter of fact.
"European Banks are in trouble".

Proceed with caution and bullish and European mattress manufacturers ..

vmromk's picture

The solution to the problem is very easy....DEATH to the central bankers.

disabledvet's picture

Which ones?

We might need some more specificity at this point.

wee-weed up's picture



Oh come now...

We all know Janet Ben Yellen will bail out the stupid euroweenies...

And then add it to OUR debt!

macholatte's picture


We all know Janet Ben Yellen will bail out the stupid euroweenies...

And then add it to OUR debt!


All the more reason to make the Euro the reserve currency.  We KNOW the EU is stable and has a big international police force ready to defend the weak, feed the hungry and come to the financial rescue of all countries without regard to race, religion, color or creed.

Oh wait ......


Or maybe the Chinese. Yea. That's it!

The Chinese are financially big and powerful and peace loving and ... 

            Oh wait ......



SamAdams's picture

No Euro-Easing + Neg rates = Melt-up in US equity markets.  FED will then raise rates slightly to attract paper buyers and also have the ability to "lower" rates during the next (current?) recession. 

kchrisc's picture

"All. Power corrupts."

I was going to write: Especially the power to steal the people's labor and product by way of fraud and counterfeiting backstopped by the violence of their partners in crime, government.

But then I realized that those that do such a thing are already corrupt.

disabledvet's picture

That sounds like a logistical problem. We've got a lot of money printers.

In defense of New Zeeland...they are raising rates. I vote for clemency!

tsuki's picture

Specificity...All of Them.

DoChenRollingBearing's picture




All of this, ever so slowly (and has for years) points to hard assets.

Banks failing means that even CA$H FIAT$ might be worth more than electrons in a bank.

Hard assets to look at:

Gold.  Other PMs.  Land & survival goods.  Even Bitcoin.

QQQBall's picture

dude. stick to little metal balls.

DoChenRollingBearing's picture

Our bearing business is nicely profitable, thank you for your suggestion.

tvdog's picture

"Proceed with caution and bullish and European mattress manufacturers .."

Putting your cash in your mattress wouldn't work the same way in Europe as in the U.S. Euro currency is issued with an expiration date - after which it is demonetized. One is periodically forced to turn in his old bills for new ones.

So far, the U.S. has never demonetized any of its currency, with the exception of gold coins. A gold certificate from 1912 is no longer redeemable in gold, but it is still money and could be spent for its face value.

Oracle of Kypseli's picture

Do you have a link on that? I could not find anything about expiration dates

Kirk2NCC1701's picture

Not just EU banks. Latin banks too.
Ecuador, the country that provided asylum to Julian Lasange at their London embassy, will now be handing over its Gold to the Fed, for... get this... more... "Liquidity".

Yeah, real assets, real wealth for Confetti.

Isn't that how they got Long Island... Baubles for real estate? With the Locals that dumb and gullible, no wonder the Aliens keep winning.

p.s. What happens to Lasange, when Gold Man has said gold and Ecuador's need for another "fix" needs to be addressed?

Pheonyte's picture

fonz: as a fellow LI'er, do you have any plans for when the shtf? There aren't very many places to hide from the fsa zombie apocalypse around here.

fonzannoon's picture

i no longer see a shtf moment. i see a slow mudslide over time. i do honestly wonder if maybe being here has some merits. if you go to Russia for example you have the big cities that are full of wealth and then the outskirts are desolate. Maybe that is the next 20 years here. maybe more, maybe less. Maybe i have lulled myself into complacency and will get caught off guard.

My in laws are pretty close to buying a place around Park City Utah. I suppose if the markets took a sudden massive leg down and things get shaky, assuming there is time, that is where i would be heading. How about yourself?

Pheonyte's picture

No, the rest of my family isn't paranoid like me, so they're not thinking about having to scram at any point. I'm single so I guess I can get up and go pretty quickly, but where to is an issue. I know nothing about buying land, and even less about living off it, so I hope your slow mudslide forecast is right.

fonzannoon's picture

fuck it maybe we go to montauk. there is a lot of agriculture on the east end. plenty of deer and you can prob grab a striper off montauk all year long.

COSMOS's picture

Yeah but you are on the same island with the riff raff in queens and the bronx, its only a matter of time before they make their way down the railroad tracks to montauk and kill and eat you.  You boys are better off having a nice decent sized yacht in Sag Harbor outfitted and ready to go, you don't need to work the land when you can fish and trap crabs and lobster off the coast.  You can sail your way up to Maine to less populated areas and set up anchor in a nice protected bay.

these folks been living on this boat for quite a while and having a BLAST.

Here is a nice pretty much unsinkable boat by virtue of its trimaran independent hulls.

With a sailboat you are pretty much independent of gasoline.  If you have a diesel on there running biodiesel, you can make your own fuel from seal blubber etc...


disabledvet's picture

"Lobster traps and snapper." Just get a Montauk and start hauling in the fishes. Maybe even a funa or two...

Yen Cross's picture

Fonz you're starting to sound like Knuks.

  You have an obligation to educate your followers.

fonzannoon's picture

The Federal Reserve’s bond purchases combined with demand from banks to meet tightened regulatory requirements is making it harder for traders to easily borrow and lend certain desired securities in the $1.6 trillion-a-day market for repurchase agreements. That’s causing such trades to go uncompleted at some of the highest rates since the financial crisis.

“The effect of all the collateral issues we see now is an indication of not so much how things are, but how bad things will be when you really need liquidity,” said Jeffrey Snider, chief investment strategist at West Palm Beach, Florida-based Alhambra Investment Partners LLC, in a telephone interview June 30. “That’s when you get into potentially dire situations.”

Yen Cross's picture

  Most people don't understand unwinding inflation Fonz.

  Nice Job.

Urban Redneck's picture

Most people are eediots.

They think it is their relatively insignificant demand deposits being on-loaned infinitely that create the huge growing money supply.

They understand it's all a ponzi scheme, yet think that there is actually enough money in existence to justify or support the prices they pay for goods and services.

QQQBall's picture

Bond shortage? LOL. Keep reading the MSM. They need liquidity b/c they are leveraged up the ass. so when they get stuck its a liquidity issue and the FED to the rescue. Same as it ever was. 2008 was it really that long ago?

dwayne elizando's picture

I see triangulation. The question is, where will that price go from here?

COSMOS's picture

YAWN.... Cant they just get the ECB to print more Euros, to pay for the wealth transfer of middle class Euro dude's bank holdings plundered by the rich who took that money out to invest in speculative real estate developments that went bust. 

As usual in the speculative game the connected individuals keep driving the prices up by 'flipping' until they dump the crap on a pension fund which ultimately takes the loss (something similar happened to Calif largest pension fund with those Apt Blds in Manhattan, they lost billions).  So the middle class dude gets screwed thrice.  His pension is Kaput and so are his savings in the Bank which went to create the bubble through easy lending, now with all the extra Euros printed to partially 'bail' out the banks (the bondholders ie the ones who took out the big loans are made whole while the depositors take a loss ala Cyprus style bailout), inflation skyrockets.

Its a game that has been going on in the middle east since the beginning of time.  Hype it up, get out of it before the set collapse, then go back in and buy it for pennies on the dollar.  Rinse and repeat in a few years time while doing the same in the meantime with another asset class.

CrashisOptimistic's picture

"Cant they just get the ECB to print more Euros"


The short answer is Yes.

The longer answer is if the Kremlin allows it, or raises oil price to compensate.

Yen Cross's picture

  The answer is an susinct NO! Albeit you have good intention's CrashisOptimistic.

  The European banking system isn't like the United States, in that it's just a shell "sovereign" .

 TOTAL (oil) from France is nothing more than an sovereign shell company.

TheReplacement's picture

Assuming Russia doesn't require payment in something else entirely... 

This year gold.

Next year yuan.

The year after that, Ukraine.




We can play this game for a couple decades.  Whatever Russia wants.

Herdee's picture

This is old news,but just the same it shows how corrupt banksters control Washington.They put up a security fee in order to stay in Russia.

Yen Cross's picture

 Draghi will do some more jawboning/  Show me the collateral Bitchez?  Europe is a hulking shell of DEBT!

The Most Interesting Frog in the World's picture

Draghi will bail them out like has already been done in Japan and US. then Spain an Greece can finance their debts at .6 % also...

disabledvet's picture

More likely is that someone actually invades Spain and Greece.

Yen Cross's picture

 In ancient times, Spain and Greece were invaded. You bring up a good point.

disabledvet's picture


BlindMonkey's picture

I am sure the muzzies would love another shot at ownership of the Iberian Pen.

Yen Cross's picture

 Iberian pen? I'm ignorant?

 The other side of Spain. I was looking at Catalonia.


BlindMonkey's picture

It is the land mass of Spain and Portugal. The Muslims conquered it in 711.

holdbuysell's picture

Ho.Liy.Shi.T.  Is the market finally figuring out that fiat central banking is a paper tiger?

Draghi better 'do whatever it takes' ASAP so that those who hold real assets will welcome with open arms those in the central bank's casino looking for real stuff.

The big print is yet to come, and the bell tolls for fiat central banking.

AdvancingTime's picture

 It might soon become apparent the economic efficiency of credit is beginning to collapse and the additional money poured into the system coupled with lower rates can no longer drive the economy forward.  When this happens we are at the end game.

At some point the return on loaning money is simply not worth the risk!  Why do you want to loan money if most likely you will never be repaid or repaid with something that is totally worthless? When this happens the only safe place to store wealth will be in "tangible assets" and the only lenders will be those who print the money that nobody wants.

The collapse of credit can pose major problems such as what we saw when many sellers were forced to demand payment up front before shipping goods in 2008. More on this subject below.



DoChenRollingBearing's picture

There is even risk in borrowing money!  I for one would not borrow at zero percent.  Where could I safely invest any money I get/got with the full intention of paying it back?

Winston Churchill's picture

Paying back money created out of thin air ?

Only my suppliers would get paid back.

Fuck the banks and the Fed they rode in on.

Seize Mars's picture

This is stupid. Epic, huge creation of credit just can't continue. The world is waking up, bit by bit, that none of this shit is mysterious.

Fiat debt compounds, and if your vision of investing involves fiat credit growth then you are out of your gourd.

Oldwood's picture

As long as their check is in the mail, does anyone care anymore? Are they increasing the chocolate rations again?