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Fearing Greek Fallout, ECB Extends "Secret" Credit Lines To Balkans
As discussions between Greece and its creditors deteriorated and pressure on the country’s banking sector mounted, some analysts began to look nervously towards Bulgaria and Romania where Greek banks control a substantial percentage of total banking assets.
The Monday following Greek PM Alexis Tsipras’ referendum call, yields on Bulgarian, Romanian, and Serbian bonds jumped, reflecting souring investor sentiment and the countries’ central banks quickly released statements aimed at calming the nerves of investors and, more importantly, of depositors.
As Morgan Stanley noted in May, the real 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.” The bank continued: "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."
Shortly thereafter the "no contagion risk" myth collapsed entirely when Bloomberg reported that the ECB had stepped in to shield Bulgaria from any potential fallout from capital controls in Greece. "The ECB 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," Bloomberg said, citing unnamed officials.
Now, FT is out reporting that the ECB has extended “secret credit lines” to Bulgaria and Romania in order to forestall asset seizures. Here’s more:
The European Central Bank has introduced secret credit lines to Bulgaria and Romania as part of a broader effort to convince foreign regulators not to pull the plug on the local subsidiaries of Greek banks.
News of the behind-the-scenes support for the subsidiaries comes as ECB governors decide on Thursday whether to extend a €89bn lifeline in emergency eurozone funding to Greece’s beleaguered financial sector.
Greece’s Piraeus, National Bank of Greece, Eurobank and Alpha Bank all have substantial assets in central and eastern Europe. If those assets were seized by local regulators, the parent banks would take an immediate capital hit, dealing a potentially terminal blow to Greece’s domestic financial system, which is already hanging by a thread as the country battles to agree a new rescue package with international creditors.
"The fear is that if someone goes first, and pulls the plug, everyone will follow," said a person familiar with the situation.
The person said the ECB had put in place special "swap" arrangements, or bilateral credit lines, with Romania and Bulgaria to reassure them that the Greek banks there would have funding support throughout the current crisis.
Similar swap lines, which enable foreign central banks to borrow from the ECB and relend that money locally, were used during the eurozone financial crisis, but were typically publicly announced.
So essentially, the ECB is now set to lend to Bulgaria and Romania in order to ensure that those countries' regulators do not take any actions with regard to domestic subsidiaries of Greek banks that might serve to further destabilize the Greek banking sector as Europe scrambles to keep it afloat.
As a reminder, Kathimerini reported in April that the central banks of Albania, Bulgaria, Cyprus, Romania, Serbia, Turkey and the Former Yugoslav Republic of Macedonia had "all forced the subsidiaries of Greek banks operating in those countries to bring their exposure to Greek risk (bonds, treasury bills, deposits to Greek banks, loans etc.) down to zero in order to shield themselves and minimize the danger of contagion in case the negotiations between the Greek government and the eurozone do not bear fruit." The ECB's fear seems to be that "quarantines" could turn to "asset seizures" which could in turn further impair the balance sheets of the parent companies and introduce yet another element of uncertainty into already indeterminate discussions around recapitalizing Greece's ailing banks.
And as for the idea that depositors in the Balkans aren't at risk, we'll close with the following excerpt from the FT article cited above:
The National Bank of Romania declined to comment specifically on the new funding line. It said its Greek banking offshoots are "sound", adding that they could refuse to let shareholders withdraw deposits and could also raise liquidity from the local central bank if the situation worsened.
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Your oxymoron of the day
sound fractional reserve bank
"It's only unsound when done on a non-GAAP basis"
-Jon Corzine
A Ponzi scheme is sound until it isn't.
So WTF else is news?
The fact that Kiev is not yet an inferno is only due to secret funds.
Fingers in dikes...dont laugh at my witty repartee please...
Well, technically the situation is kind of bad, worst than it looks but not necessarily for the Greeks...
Greek referendum from 2 weeks ago, expressed a very precise indication. Going against that referendum, makes any deal subscribed by the government virtually non existing. For the government becomes illegit to go against it. It means greek banks can reopen use the funds made available by the EU, and any subsequent elected government could simply delegitimate that decision. No tribunal will ever be able to stop Greece from repealing the deal after having used the EU liquidity assistance funds.
I think it was ingenious... It is check mate in favor of Varoufakis... or the revenge of who must not be named...
;-)
only if they take advantage of this option... of course...
This is rich. I was in Romania around the time they were seeking admission to EU.
An analogy that stuck with me, seeing all the homeless street urchins who would most certainly comb their hair and behave long enough to get adopted.
The streets in a very old section of Bucharesti were ripped up, one had to walk on planks. It was advertised as an "infrastructure project," as if they know what one of those is. I found one shirtless old man operating a wheel barrow with one handle, and two teenagers sitting in the dirt.
I can't imagine anybody from the EU actually went there to monitor their "progress" on improving "infrastructure."
Oh, yeah. The infrastucture project was supposedly to replace million year old sewage and plumbing. They ripped up and trenched, then was immediately flooded with rain. Coliform everywhere in the water.
so, they actually DO have "shovel ready jobs"
Well, I saw a broken wheel barrow, but no shovel. Maybe they were waiting for more financing.
Holy Arch-Duke Ferdinand, Mario! Shades of the Fed's secrect currency swap lines a la 2008!
Yup, and of the Goldman-engineered swaps that fraudulently allowed Greece to join the Euro in the first place.
So what is going on behind that curtain, and how bad is it really ?
"Contained" to the Balkans like WWI was.
About as "secret" as Melissa McCarthy's gunt.
Or Nuland queefing.
New Zh contest:
Where in the world is Nuland queefing?
Or Nuland queefing.
New Zh contest:
Where in the world is Nuland queefing?
The Bitch Slag was queefing in the Den of Pikers that is the Ukrainian parliament yesterday. Watching her saunter around like she owned the gaff which she probably does was sehr amusing.
On leaving the cunt was escorted by the Right Sector Knuckleheads onto her next colour rendezvous, not before checking in with the AmeriUkie Stooges who fill the Treasury and the central Bank.
Free Hunter Biden.
I wonder how the Baltic states will feel?
Couldn't give a monkey's chuff how these tin-pot USSofA vassal's feel. When your largest importer/exporter is Russia who cut off economic ties due to sanctions placed on them by Vichy DC/EU causing your economic collapse and yet you add insult to injury by parading US tanks in your street then who could give a fook if you starve to death.
Can't fix Stoopid
Pay very strict attention to this development.
So when the Baltic Banks can't pay back the ECB, then .....
"Its Howdy Doody Time, Kids!"
Now, this is Educaitonal:
https://search.yahoo.com/yhs/search?p=howdy+doody+theme+song&ei=UTF-8&hs...
That's why they call them Central Banks I guess.
"Stick them with the trillion in shit paper."
Sure beats working for a living.
Now blow that bubble even bigger! Netflix back to a thousand!
Hah. The only person that actually did infrastructure projects in Romania was actually Ceausescu. Now they say they do infrastructure projects, and all the politicians pocket the money, blatantly. At least Ceausescu was more circumspect about it, and paid off all of Romania's western debt, by depriving the people, of course. Not that I liked him, but people I know now refer to communist rule as the "Good old days". At least back then, you knew who the thieves were. Now you have no earthly idea, because everybody is stealing and ripping people off.
Quite a place, if you have a sense of humor. I caught an episode of "Sex in the City" on tv, which in romanian translated to "Desperately Seeking Sex". They had their own versions of american idol and such, except they all involved pole dancing and stripping. The kiosk in the hotel lobby was filled with pamphlets advertising hookers.
I know Romania fairly well and even the young hookers are fleeing to Ireland.
You can't take a piss in Transylvania without Bucharest demanding a share of it.
Romania used to sell Heavy Machinery to Germany for Fsake and with the fall of the soviet union nearly all business is Kaput as they are clueless in Marketing.
The EU subsidies for Farmers in the country never reach them such is the 2 way corruption between the EU and Bucharest.
The youth are well educated but there are F.all jobs. Still do those young whippersnappers fight back? NO.
The good news though is that HRH Prince Charles and his Hungarian business partner have a huge organic dairy farm and other Assets in the country. Apparently he doesn't own enough land in the UK. s/c
Hmmmm, this could be very foretelling of things to come soon.
Well, Skippy, it's not a secret any longer.
So with the "bailout" of the Greek government (I can't emphasize that enough...but maybe we can touch on all governments tendency to impoverish everyone UNDER their "stewardship" some other time) AND "secret lines of credit" to back "sovereign assets" (lol) and their derivatives, what are we up to, exactly...half a trillion euros, give or take?
So whats the tab for this bit o fiat magic and what tax payers tab does it go on? Just guessin the German people are buying this round. The banks naturally will be getting their cut up front. If it works hell they might end up owning these countries too.