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Fearing Spillover, ECB Moves To Shield Neighboring Banks From Greek Meltdown
On Monday, in “Beggar Thy Neighbor? Greece’s Battered Banks Beget Balkan Jitters,” we took an in depth look at the potential for the Greek banking crisis to infect Bulgaria, Romania, and Serbia, where Greek banks control a substantial percentage of total banking assets.
We noted that yields on the country’s bonds had spiked in the wake of capital controls in Greece and the ensuing ATM run, a reflection of souring investor sentiment despite assurances from local banking officials that there was no risk of similar measures being implemented outside of Greece.
“Any action by the Greek government and the central bank to impose measures in the Greek financial system have no legal force in Bulgaria and can in no way affect the smooth functioning and stability of the Bulgarian banking system," Bulgaria’s central bank said, in a statement.
Still, as Morgan Stanley pointed out nearly two months ago, “the risk is that depositors who have their money in Greek subsidiaries in Bulgaria, Romania and Serbia could suffer a confidence crisis and seek to withdraw their deposits. Although well capitalised and liquid, Greek subsidiaries in the SEE region may see difficulties providing enough cash if withdrawals are intense and become problematic. In case of a liquidity shortage, Greek subsidiaries in Bulgaria, Romania and Serbia would probably create the need for local authorities to step in. Local central banks and governments would most probably provide additional liquidity, but if panic behaviour develops it would mean that certain banks would either have to find a buyer or be nationalised. In this case, the national deposit guarantee schemes will have to repay guaranteed deposits and, in case of insufficient funds, the government will have to provide them.”
Now, with Greece’s future in the EMU hanging in the balance, Bloomberg says the ECB has stepped up its efforts to shield Bulgaria from any fallout. Here’s more:
The European Central Bank is set to extend a backstop facility to Bulgaria and is ready to assist other nations in the region to ward off contagion from Greece, according to people familiar with the situation.
The ECB would provide access to its refinancing operations, offering euros to the banking system against eligible collateral, the people said, asking to remain anonymous because the matter is confidential. The ECB and the Bulgarian central bank declined to comment.
Eastern Europe is at risk of tremors from Greece via ties ranging from trade to finance, with lenders from the debt-ridden country owning almost a third of banking assets in Bulgaria. The possibility of Greece abandoning the euro after shutting banks and imposing capital controls has left eastern European currencies among this week’s worst emerging-market performers.
“The threat of ‘Grexit’ has understandably cast a dark cloud over the outlook,” for the region, London-based Capital Economics said last week in a note. “Ties with Greece are sizable in a few places, including Bulgaria and Romania.”
Bulgaria and its banks have been a main focus of concern for European Union officials looking at potential fallout from the Greek crisis in the region, according to people familiar with their thinking. The yield on euro-denominated Bulgarian government debt due 2024 has jumped 25 basis points this week to 2.61 percent.
It certainly appears as though the whole "Greece is contained" line is yet another example of a vacuous attempt to calm a panicked public by issuing hollow assurances from on high and compelling the media to parrot them to the masses in order to obscure the real risks — a strategy which works until the soup line photos start showing up on social media.
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Anyone else hear a cracking sound?
"The ECB has for the first time added a series of companies to the list of issuers whose bonds it can buy.
"The bazooka is ready - just a few days before the Greek referendum," said Alberto Gallo, credit strategist at RBS.
Up until today, the ECB was buying the bonds of government agencies in addition to its shopping list of government bonds, writes Joel Lewin.
This morning it published an updated list of the eligible issuers on its website, which now includes a several corporate issuers for the first time, all of which are Italian infrastructure firms.
The corporate names are ENEL- a multinational manufacturer and distributor of electricity and gas, Terna- an Italian electricity transmission system operator and SNAM- an Italian natural gas infrastructure company.
Hyung-Ja de Zeeuw, a credit strategist at ABN AMRO says she thinks they chose these specific corporate names "because it wouldn't disrupt the level playing field (competition). They have natural monopolies."
http://www.ft.com/fastft/354121/ecb-adds-corporate-names-qe-eligible-bonds
I love the smell of fascist fear early in the morning ;-)
This. doesn't sound "contained" to me...the opening "Event Horizn" of a journey into hyperinflation...
Journeys into the neitherworlds.
They can't shield other banks because they are all joined at the hip, plus there is no way to contain fear around the world. Folks, they have officially lost control!!!
"SubPrime Is Contained"......Circa 2008
Don't spill we all over yer table cloth okay?
To you both...and do note what ABN AMRO uber-statist fascist...errr, ummm, "strategist" Hyung-Ja de Zeeuw said: "because it wouldn't disrupt the level playing field (competition). "
That is to say, a market being somewhat free of outside forces or manipulation and of course, no one will come running into these now that the ECB is officially back stopping them.
"They have natural monopolies."...the EU & ECB allows and now openly supports monopolies.
How very, oh whats the word I'm looking for...fascist.
Remember the Budwieser frogs? They have a new gig.
"Print"
"More"
"Euros"
...and Fascists burning in the evening
Hey nmewn,
Relax. I come in peace.
I just wanted to vote you up for a BRILLIANT and TOP QUALITY post Buddy.
I hope as fellow ZHers, we can have more agreements than disagreements.
I suggest we start calling them GARBS (Greece, Albania, Romania, Bulgaria, Serbia) and MARGS (Macedonia, Albania, Romania, Greece, Serbia).
A crisis in the Balkans that will usher in an overthrow of the current "regimes" for ones that are much more "democratic" (Anti-Putin). How convenient. The IMF is after all just another arm of USA foreign policy... who says you can't teach old dogs new tricks? The CIA must be pissed that they aren't playing the leading role in this one.
I'd call em BRAGS instead.
Where in the Balkans can you find pro-Putin govt ? Definitely not in Bulgaria or Romania. I cannot say for other countries but I doubt there are.
BI GRAMPIES
Bulgaria Ireland
Greece Romania Albania Macedonia Portugal Italy Estonia Spain
FAGS' LIMBS CLING PELFS
(all 19 eurozone countries)
I may be an ignorant redneck, but I have a question.
How much money is really at stake if Greece leaves the euro? A few hundred billion maybe? Somehow, the EU cannot sustain such a loss without everyhting blowing up?
I'm confused and not ashamed to admit it.
Paper money (meaning the dollar in your pocket) is just a notional claim on an asset (meaning a fixed number.)
We could return to haggling to set the price (seller offers very low price/buyer demands very high price) but compared to that simply "affixing" the price is obviously a lot more efficient.
"Cash and carry" as they say.
If however your "fixed exchange" resets directly to "a number"...well, that number can become infinity.
This makes "means of exchange" such as gold or silver VERY valuable...
Not the question the guy was asking....
Hmm, disabled you say?
In 2010, when the debt which Greece owed was still owed to the private sector (read: the banks), a Greek default would likely have brought down the European financial system. Today, this debt problem is still out there, but has been transferred to the public sector (read: the EU taxpayer), effectively mutualizing these debt liabilities across the Eurozone through the backdoor.
The risk of a financial breakdown in the Eurozone has strongly been reduced because of this measure. The problem a Greek default would cause today is the psychological effect that it would have on markets. Greece deafulting likely would lead to it dropping out of the Euro, setting a clear precedent that the Euro currency is, in fact, not irreversible. That might invite speculative attacks on other EU member states who struggle with unsustainable debt loads (Italy in particular, which is the 3rd largest economy of the Eurozone).
Elrik, that's nothing but MSM bull shit.
You spend too much time on Bloomberg and CNN.
Hope you're long the market right now, cause this is gonna hurt bad. Maybe enough to cure you of believing the BS you're fed by the MSM
Well, the conventional wisdom in financial outlets is that "contagion" in the event of a "Grexit" would be manageable, due to the ECB "backstopping" the system.
I am not so sure this is true.
FOR THE TIME BEING (time being relative of course) "everything with reset to the U.S. dollar."
That's just my point of view...a "notional" claim also means "speculative...
I believe you are right and wrong.
Yes, confidence might be shattered.
No, the Euro has not saved the day by mutualizing the liabilities. Causing more people to share the risk does not alleviate the risk, especially in regards to Europeans who tend to cause the greatest calamities in all of human history. After all, Europeans gave us modern central banking and the hundreds of millions of victims of the same.
If that were true, you'd be right, and we wouldn't even be in this situation.
But it's not.
We have to stop believing what we're told. This is a manufactured crisis and it WILL get out of control, by design. You're confused because you're accepting the BS you're given and trying to line it up with logic. That doesn't work.
Try this:
The elites want to blow up the system so they can launch the NWO, where they will consolidate power into fewer hands. Now, all of a sudden everything makes sense
I cannot necessarily buy that at face. It may be an actual accident.
The consolidation of Monetary Systems was keystone in order to enact the NWO.
There was the EU which removed a sovereign's power to issue currency and allow market forces to set the value of the Sovereign's Currency.
The North American Union was also planned to unite the currencies of the USA, Canada, and Mexico into the Amero.
The plan was to consolidate the currencies into regional currencies and, following that, then to unite the reginal currencies into a World Currency, poosibly the SDR, using the bullshit premise that it creates "fairness in exchange".
But I think that Russia refused to play ball and China was looking after her own interests, seeking to replace the US Dollar as the World's Reserve Currency, with the Yuan.
So you may be right and perhaps this is the other side of the Hegelian Dialectic.
But it still seems accidental to me. I do not believe that Tsipras was expected to be elected, not a Club Member, and is calling the game as a true Black Swan. That is why Germany, and the rest of the Troika, wish him removed as he is true opposition rather than controlled opposition.
Time will tell and if he retains power then most likely he will be assasinated if I am correct.
You know that they do not play nice.
You're both right. They may have been planning a complete global takeover for thousands of years, but there will always be problems, either Murphy's Law or Black Swans.
It is apparent they have lost control of the derivatives and CDS, otherwise they wouldn't be hiding from 'defaults'. Fukushima is destroying Japan and North America - slowly but surely - and neither will last more than a decade before they become radioactive wastelands.
Obama and Congress have transferred US sovereignty to the International Corporations, but the other potential signers have extremely cold feet, and China holds all the cards, unless the West pushes all the nuclear buttons, which they are threatening to do. Submit or Global Suicide.
Every player has torn allegiences, hence all the spying of each other.
A small handfull of inbred paedophiles who have grown up worshipping Lucifer will kill 8 billion people, and every other living thing on this planet, if they don't get their way. Or should I say, kill them before all the nuclear power plants break down and do it anyway.
No, they do not play nice.
Don't wait to tell anyone you love them. There is no predicting the trigger point.
"A small handfull of inbred paedophiles who have grown up worshipping Lucifer will kill 8 billion people, and every other living thing on this planet, if they don't get their way."
'And the snake said, I know we'll both die. I bit you because I'm a snake and that is what snakes do.'
They are called NeoCONs and are mostly Jewish
The problem is due to the mechanics of Fractional Reserve Banking.
If a Bank holds a substantial sum of Greek Bonds, the sum exceeding that of the Bank's reserves, and the Greek Bonds are revalued at ZERO, because of the Default, then the Bank which holds the Greek Bonds is INSOLVENT as they do not have the Reserves required by law.
Now if you were another banker would you loan your Caoital to an inslvent bank? Of course you will not as it is IMPRUDENT and it violates your Fiduciary Responsibity to the shareholders and depositors of your Bank.
Thus the predicament boils down to who owns Greek Bonds, how many Greek Bonds do they own, and are they insolvent as a result of their exposure?
Of course this information is not readily available.
Thus what follows is that the bankers will lack FAITH, TRUST, and CONFIDENCE in anoter Bank's ability to pay back any loans offered. This means that Long Term Loans are really questionable and overnight loans FREEZE.
The World Banking System operates basically of CREDIT, on the Faith, Trust, and Confidence that a Debtor has the ability to repay their debts. Insolvent institutions do not have that ability. They are technically Bankrupt although Bankruptcy is a LEGAL TERM. Insolvency and Bankruptcy are actually synonyms IN A SENSE. (I know that somebody out there will hammer me for my simple explanation as I am trying to keep it simple. Give me some slack, please?)
This is NOT just some far fetched "theory" as the same thing happened in 2008 when many Banking Institutions refused to extend overnight loans due to the Mortgage Backed Securites collapse.
We had a Worldwide, a Global CREDIT FREEZE, as a result.
Likewise this Greek Bond situation may also set off CREDIT FREEZE II.
However this time the endemic structural problems are much worse. The World Central Bank balance sheets have ballooned into nightmarish proportions. The Derivatives Market has bubbled to the tune of $1500 Trillion with nly $100 Trillion of Physical assets backing it. It is levered at 15 to 1.
And the small, the relatively small Greek Bond fiasco, is just a fuse that sets this Financial Weapon of Mass Destruction off.
Greece is like a small domino in a chain of larger and larger dominos. And it is unfortunately large enough that when it topples it will take out the next larger domino, which is also large enough to take out the following larger domino, right up the chain to the last domino, the US Dollar, the World Reserve Currency.
And when the US Dllar falls it is over and all that we will be left with is the ruins of a World civilization..
And there is not enough money in the entire World to fix it.
Hey Janet...Print $1500 Trillion please. Yeah Right. (That is only just 1000 times larger than the Official US National Debt. No problem, right?)
As in 2008, the Fed will not allow the dominos to fall. When the system locks up again for fear, the Fed will restart QE. The Fed propped up commercial paper when the banks acted like assholes and got scared in late 2008 and stopped lending to each other or commercial paper working capital to big companies. In fact, the Fed I am sure already has contingency plans. But I will say this, at some point, whether it be folks in Germany, here in the US or elsewhere, folks are going to tire of lending increasing amounts of money to Greece and countries like Greece. Their retirees have been living high on the hog for far too long, drawing benefits from a country that clearly can not support this level of support. I have never understood why anyone invests in government paper of a serious nature, and not just because of this. Politicians will ensure that governments never run surplus again for any length of time, so the annual operating deficits and accumulating debt is here to stay. And politicians get their jobs because the people have become quite weak and intolerant of any meaningful austerity. Even now, the Greeks refuse austerity measure when their country can not afford what the hell they are doing, and think they are going to keep getting money to support their lifestyle. Someone has to keep underwriting this denial behavior, and perhaps those that have been have finally declared enough.
There are going to be banking system bailins and there are going to be mandated government bond haircuts. It is inevitable, these governments just do not have the means or the political will to work their way out of it properly with economic activity and finance to pay debt back in the traditional sense. There is no political will period, and why should there be. The voters are not holding them to account.
And for those who keep saying to invest in gold in ZH, I see gold is still under $1175. Now if this was such a smart play as this scare blog keeps saying, why hasn't gold skyrocketed already? Others keep calling for hyperinflation, but it hasn't happened yet. Why? Because the overall larger deflation continues in spite of denials from every official.
I forecast Gold to be at $1000 in the near future when the collapse happens. The US Dollar will be King for about 6 weeks due to lack of Physical Dollars currently held in the States. Afterwars we will get hyperinflation as the Banks print actual Physical Dollars in response to the Credit Freeze. (All ATM transactions will FREEZE.)
Furthermore insolvent Foreign Banks will be liquidating their Physical Dollars, some $12 Trillion of them, as the Foreign Central Banks become insolvent...due to the Credit Freeze.
Those Dollars will be repatriated to USA shores.
With the Fed overreaction and the repatriation of the Physical holdings of Foreign Central Banks we will experience a hyperinflation within our borders.
You and your ilk have lost the game.,The Ponzi is over. You deserve what will happen to you on a personal note, especially since you promote wealth destruction.
Enjoy.
It's not the initial sum, but rather that which is chained to it. The fractional reserve lending
I believe the keep question is knock on effects... derivatives that are many multiples of the actual debts in question.
Edit: This is just getting silly. keep=key in some damaged part of my brain.
I wonder how hard it was to play the violin on the deck of the Titanic? All that listing must have been annoying. Yeah, the screaming out of key probably got a little frustrating as well.
This Ponzi scheme will collapse. Resistance is futile motherfuckers.
Swiss National Bank gonna hafta change tack. Can't go on eatin devalued euros forever. I think their lookin disaster in the face. Swiss business going to be pissed when exports collapse. Another fine mess central bankers created. Swissy to the moon monday.
YeeeeeeHaaaaaaa Banksters are printing themselves up a bundle.
Riding the storm out... Good luck with that one, house-o-cards ECB clowns.
I stand by my timeline of worldwide economic collapse late 2015.
made when?
HELLO! Sunday's vote does not matter.
The ECB only just now decided to backstop surrounding country's Greek banks? Right!
This is shock therapy at its nastiest. 'They' are using their (failed?) fiat euro currency as a weapon. When these psychos are ring fencing, they've already made a decision.
In case anyone had any doubts of intentions - not anymore.
Greece is being hung out to dry.
"eligible collateral" = your fucking souls