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Leaked ECB Minutes Reveal More Internal Posturing Over Cyprus Bail-Out
The ECB may not release its minutes to the public (opting instead to keep these secret for 30 years) at least for now, but earlier today a transcript of its internal deliberations was made public by the NYT, which revealed how the ECB governing council once again snubbed its responsibilities, and in January 2013 bailed out a failing Cyprus bank, Cyprus Popular Bank, just months ahead of the now infamous Cypriot "bail-in" i.e., deposit confiscation. The story in a nutshell: following much internal wrangling and posturing by the "northern" states, notably the usual suspects such as Wiedmann and Knot, the Cypriot bank, which the ECB continued to bail out even though it should not have as the bank had obtained an ECB lifeline based on fake financials and glaringly impossible assumptions, the bank ultimately failed. Who was left holding the bag? Why Cyprus' depositors of course.
The NYT explains how Popular Bank was "stung by a disastrous bet on Greek government bonds" and had been "in trouble for the better part of 2012 and depositors were withdrawing their savings in ever larger numbers" - this is largely known. What is not know is how the ECB once again trampled its mandate, which clearly is just for show, when it came to keeping the bank solvent for just a few more months so as to avoid yet another European market crash:
[Cyprus Popular Bank] needed cash and fast.
Under E.C.B. rules, troubled banks that can no longer raise funds on the open markets are allowed to borrow from their national central bank, which assumes responsibility for this so-called emergency liquidity assistance, or E.L.A. Still, strict rules govern this process. The bank in question must be solvent. And if the loans surpass 2 billion euros, or $2.56 billion, the E.C.B. reserves the right to refuse additional requests for money. The methodology for valuing the collateral used to secure the credit also has to be disclosed.
Fearing possible contagion if the bank failed, the E.C.B.’s governing council, a decision-making arm consisting of 24 members, had approved an emergency loan request by one its members, the Central Bank of Cyprus, in late 2011.
In early 2013 things were coming to a head, and the collapse of Cyprus seemed inevitable. By then "loans to Cyprus Popular Bank had grown to €9 billion, about two thirds the size of the Cypriot economy, and Jens Weidmann, the hawkish head of the German Bundesbank, had begun to forcefully argue that this exposure was too large, according to the minutes of governing council meetings."
By approving the loans — which were disbursed by the central bank of Cyprus — Mr. Weidmann said that the E.C.B. was violating a core tenet. That rule holds that banks on the verge of failure should not be bailed out with additional loans.
It was here that the now traditional posturing and data fabrications started: In December 2012 Weidmann said that “It was not the governing council’s job to keep afloat banks that were awaiting recapitalization and were not currently solvent." A month later he followed up:
In January 2013, just two months before the controversial Cyprus rescue package, Mr. Weidmann repeated his complaint that the E.C.B. was putting itself at risk in propping up Cyprus Popular Bank — which subsequently changed its name to Laiki Bank.
Moreover, Mr. Weidmann said that the value of the collateral posted at the central bank was inflated — which, if true, would allow it to secure more credit.
This was a powerful charge as it questioned whether the Cyprus central bank, under its new governor, Panicos Demetriades, was trying to play down the bank’s problems in order to keep it alive.
To buttress his claim, Mr. Weidmann told his colleagues that the E.C.B.’s own risk analysts had concluded that the assets that Cyprus Popular had posted at its central bank were overstated by about €1.3 billion.
Others jumped on the bandwagon:
Christian Noyer, the head of the French central bank, said that he was “very much concerned” by the aggressive way that the Cyprus central bank was valuing the collateral, adding that it “doubled the risk” for the E.C.B.
Klaas Knot of the Dutch central bank also chimed in, saying the collateral issue made him feel “very uncomfortable.”
“If E.L.A. was provided without adequate collateral, this would be a grave issue,” Mr. Weidmann concluded, according to the minutes, as he pushed for the loans to be withdrawn.
He pushed, and pushed and... nothing, as usual.
Under a section in the minutes called “solvency information,” the governing council noted that it had received a draft report from the asset management company Pimco that said that bank needed about €10 billion in fresh cash — or about 10 times its capital at the time.
There would seem to be little doubt that the bank was finished, but the consensus was to keep the bank alive until an agreement could be reached on a broad rescue program with the Cyprus government.
The governing council decided “not to object”– in E.C.B. parlance — to the continuance of the lifeline.
Draghi, and the firm he worked for prior to joining the ECB, had won again. Not once did ut occur to the ECB to warn the population of Cyprus - because it wasn't just Russian billionaires who lost their deposits in Cyrpiot banks - that one of its largest banks was about to fail and wipe out years of savings.
So why is this a story?
The concern has been that the airing of these discussions would reveal national strains and weaken the E.C.B.’s federal mandate. The governing council consists of the heads of the 18 central banks that make up the currency union and a six-member executive board over which Mario Draghi presides.
Apparently the ECB cared enough to release the following statement shortly after the NYT story hit:
The ECB neither provides nor approves emergency liquidity assistance. It is the national central bank, in this case the Central Bank of Cyprus, that provides ELA to an institution that it judges to be solvent at its own risks and under its own terms and conditions. The ECB can object on monetary policy grounds; in order to do so at least two thirds of the Governing Council must see the provision of emergency liquidity as interfering with the tasks and objectives of euro area monetary policy.
In this specific case there was full consensus in the Governing Council on the need to get assurances from the Central Bank of Cyprus that this bank was solvent. This was confirmed explicitly by the Central Bank of Cyprus, which also confirmed the proper valuation of collateral after an intense dialogue between it and the ECB.
The ECB was not the supervisor and fully relied on the assessment of the Central Bank of Cyprus. Therefore to draw conclusions about the ECB’s future banking supervision role on the basis of ELA to Cyprus is tendentious.
And with that, the ECB will continue pretending that all is well, it will continue to bail out borderline insolvent banks until it no longer can, at which point European depositors will continue to, first rarely and then all at once, fund Europe's creeping bank insolvency wave because for all its talk, the ECB has done nothing to address the real elephant in the room: several trillion in bad loans spread across Europe's banking system, the direct result of Europe's historic depression, and which can only be "fixed" one bank at a time when its deposits are "realligned" in line with its viable assets, or to use the parlance of Jon Corzine "vaporized."
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FUCK YOU DRAGHI and every other "Central Banker" on the planet !
END the criminal cartel called "the Fed."
You may think it's Weidman but it's Knot
Apparently, after joining the US Navy at age 43, lawyer, "former lobbyist," Ukraininan gas mogul, and son of our Vice President, Hunter Biden, is kicked out of the US Navy at age 44 for being a coke head.
That is a fucked up resume. What a leader! We are looking at the next Ted Kennedy. He should definitely go into politics.
Being a former drug addict seems to be a prerequisite for presidential candidates these days.
This fries my ass..
Minister: Bailed-out Cyprus' economy on the mend
“Cyprus' finance minister says the bailed-out country will manage to keep its debt well below projections by its international creditors.”
Bail OUT .. thanks for being a stooge, AP.
This Euro party has only started... Its a long ass way to USD parity...
Markets open every day; they'll take your call. there's no law against profiting on its decline; in fact it's perfectly legal.
What Draghi really is trying to do is offer a form of debt forgiveness exclusively to the big banksters. The son-of-a-bitch should be air dropped into downtown Monrovia with nothing but a set of skivies.
FYI: Belize government claiming two individuals on the stranded cruise ship have symptoms of Ebola; the woman who worked with Duncans samples, and her husband.
http://belizean.com/belize-confirms-patient-with-ebola-symptoms-on-cruis...
former...lol
Hunter, Ashley, and Delaware Attorney General Beau Biden have kept a lot of coke dealers in business throughout the years. If Beau runs for Governor in DE, I hope they force him to release his medical records related to his "stroke."
Now we all understand why Bonds are a safe haven, right ? because you get your money back; there's no bank involved. Bonds down today as the market rallies.
Another Pathetic individual who looks to the Government to solve problems. You take food from the Government you starve, you take money from the Government you go broke, you take Healthcare from the Government you get sick and die!...
Has anybody else but me (LOL) noticed that just about every civil, social, moral, ethical and economic ill has a significant element of governmental participation at heart?
Or am I just imagining stuff, again?
To wit: We're gonna appoint an Ebola Czar, not yet restrict air travel and claim that budget cuts are behind the malaise.
When in fact, any epidemiologist who has a single clue knows that cordon sanitaire ids the only effective means to control a filovirus and where are we? Fucking around for political and correct reasons. Budget? They need their budgets cut.
Ah... off to a meeting for sanity's sake.
PS They now say the entire line of defense for Ebola (BBG) is hand sanitizer and prayer.
Welp, that shit don't work in a country that don't believe in prayer.
Go figure and die
We have so many Czars that we are we going to need a Czar Czar.
If lawyers and politicians ran the world it would look just like it does now, cause..... they do.
And it will not change cause they think they are doing a great job....
More of the same only worse.
LEAKED OR SQUEAKED... WE DONT GIVE A FUCK!
Weidmann "pushed and pushed but ...nothing, as usual"
Sounds like Wiedmann could do with a packet of Quantitative Easing tablets
Every single euro bank has made the same bet on sovereign euro bonds:
The NYT explains how Popular Bank was "stung by a disastrous bet on Greek government bonds...
shh...it's a secret
Im telling you but dont dont tell anyone else...
What's this have to do with the new iPad Air?
You can stock iPad Airs and when the plague comes around eat them while sheltering in place playing Robot Birds and exchanging pictures of your bloody stools
And don't forget. What goes around, comes around. The filoviruses think of people as meat.
Back in the old days we just called this lying.
They will illegally print and throw money at every problem that comes up. Mandates, legality, constitutionality all be damned. They know what's at stake. Besides, what's going to happen to them? Get thrown in jail? Don't make me laugh.
The 'data set' that predicted the Ebola cruise ship problem?
http://wtfrly.com/2014/10/17/data-set-that-predicted-the-ebola-cruise-sh...
Cruise ship denied port in Belize as US tries to evacuate Dallas nurse who handled Ebola sample
http://wtfrly.com/2014/10/17/cruise-ship-denied-port-belize-us-tries-to-...
Ok, sorry to be a grammar nazi here, but what is up with the run on sentences in the ZH articles? That first paragraph is basically one long sentence.
new here?
No. I just finally had to say something.
It's just a thing they do. Tylers love compound complex sentences. I think they have contests to see who can write the longest one.
http://rs1img.memecdn.com/this-goes-out-to-all-the-grammar-nazis_o_62329...
I sentence you to a paragraph.
You're attempting to join the prepackaged American foothold union. You will die by a bullet before that transpires.
We are Americans protecting wealth, start becoming a EU net profit union. Until then, you're just parasites backing laziness. Eurotrash cunts.
What rules...we can do anything we want...and folks..the CBs will do just that...whatever they want to save themselves....
They will begin wearing Kelvar. The head shot won't protect the weasel lying P/E at 110+
No wonder the markets are falling apart.
Its hard to have confidence in the long term viability of a global economy based entirely on accounting fraud.
Enron students.
Lost count of the Greek bailout number. What bailout number is it for Cyprus?
The announcements are just to boost stocks. We can't let that srop too much because year-end bonuses are coming up.
It's all about the Bankster cabal, screw the rest.
Not really bailouts, they just decided to push the west wing of the banker retirement villa out another 7000'.
• ‘Stunning’ Fed Move Put Bottom Under Stocks (CNBC)
Wake up.
Stop using the expression, "TOO BIG TO FAIL BANK"
THE TRUTH IS, "TOO BIG TO FAIL INVESTOR"
-----
Health is the wealth that will keep you in the lucky 40%
The bank can talk or write? Did I miss any technological revolution?
Good political systems have an important mechanism to avoid parasites taking over: PERSONAL RESPONSIBILITY.
Can anyone imagine that Draghi, Bernanke, Yellen, Blankfein, Dimon, Geithner, Merkel, Hollande, Cameron, the world-terrorist in the WH, the party leaders would apply for their current jobs if they would be held PERSONALLY responsible with everything they or their family owns?
The new big trick of neoliberal bankdebtocracy
http://failedevolution.blogspot.gr/2013/03/the-new-big-trick-of-neoliber...
Where are the leaked documents? Link?
it wasn't just Russian billionaires who lost their deposits in Cypriot banks
Why does Tyler now also repeat this lie?
It was no accident that Cyprus' bank offices in London were kept open when the offices in Cyprus remained closed. It was a backdoor invitation for the billionaires to rescue their deposits and flee, and one has to assume most did as you never heard any billionaire complaining how much s/he lost. Which means mostly the small savers got screwed by the bail-in.
But then why did they do that? I mean it would have been easy for the ECB to print a few billion Euros more and bailout all those small savers.
It makes no sense... unless one changes viewpoints:
Maybe the idea was to kick out Russian investments/interconnectedness from Europe. Not steal their money (which would create repercussions) but let them flee and nullify their financial influence.
Since the Ukrainian western-staged escalation this theory gains a lot in credibility, making it the initial western step of re-starting the cold war.