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How The ECB Took Over Greek Banks, In One Chart
Earlier this week, when we reported that as part of the just passed latest Greek austerity package which open the way for the third Greek bailout, "one of the preconditions imposed on Greece for a deal is that it signs into law European rules that would put euro zone authorities at the ECB and in Brussels, rather than Athens, in charge of identifying and closing or breaking up sick banks."
As Reuters added, "this in turn could lead to a shake-up of the sector that could see some banks close, with losses pushed onto bondholders and possibly even large depositors. In such circumstances, there would be little that Athens could do to prevent this."
That was merely the political aspect of Greek handing over its sovereignty, which also meant granting control of Greek banks to the ECB.
Earlier today, Draghi also confirmed the far more practical one. First, as we learned, Greek ELA was increased by another €900 million to just shy of €90 billion.
But more importantly, Draghi also stated that total ECB exposure to Greece (i.e., its banks) now stands at a total of €130 billion which includes various EFSF and other claims. Putting this in context, total Greek deposits were at about €120 billion at the last optimistic estimate, and likely well lower now.
In other words, as the chart below shows, when it comes to the entire Greek financial system, the ECB is now in full control with its "support" of banks at least €10 billion more than total Greek deposits.
Incidentally, the latest total exposure to Greece is about €30 billion more than the entire capital and reserves of the Eurosystem, but that is a topic for another day...
Which brings us back to the original question: for all his pompous rhetoric, Mario Draghi showed that when it comes to determining the political fate of a nation, he will not hesitate to force capital controls. So it will be up to Greek depositors now, for whom the question is simple: will they trust the "goodwill" of the ECB ever again - sure Draghi got his way, and is allowing a modest increase in bank withdrawals once capital controls are lifted, but what happens if Greece again votes in an anti-austerity party when the next inevitable elections take place, and specifically: how long before the ECB once again freezes Greek ELA so no more deposit withdrawals will be allowed.
For the answer, look at what Greeks will doing when banks reopen: will the lines be to deposit cash... or to withdraw it. If the latter, then nothing has really changed and the ECB will be forced to keep raising its ELA until such time as it caps it once more, or all Greek deposits are withdrawn and the ECB no longer has any leverage over Greece.
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Who gives a shit now.
Ok Draghi, that was fun. Lets see you gobble up the Spanish banking system next.
https://s-media-cache-ak0.pinimg.com/736x/51/b7/31/51b7311cb8ea92dbf777a55e9ce9b328.jpg
Ukrainian Myths and Ukrainian Lies
http://thesaker.is/ukrainian-myths-and-ukrainian-lies/
Our allies in WW2 were Russia and China, today they are bad guys, in WW2 Germany and Japan were the bad guys today they are our allies. Does the public care ? NO Smoke and Mirrors
"The Ukrainians were behind the Korean and Vietnam wars." --sam i am, quoting the saker
Come on.
I really hope our banking system isn't in such a bad shape as the greek after the 100bn we burned to fix it.
Mark to market is a bitch. As long as Bankia doesn't actually have to mark its assets to their true value -- no problemo hombre!
Oh shit, the B word. Its mere name makes my hopes fade almost instantly.
Deposit confiscation. If this is not seen as the CB's (oligarchs) declaring war on all of us, then there is no hope for the sheep.
I just keep telling Mrs. SWR "we still have money they haven't taken from us yet; it won't end until they have it all."
Enjoy starving to death when the Collapse comes!
Euro bottoming. Dollar is ready for a tumble.
not yet
I thought it was just an urban legend that the Greeks liked it like that?
pods
https://www.youtube.com/watch?v=oogL0YGvyyk
Just a shit show. The last thing a hearing impacted was the MLB.
Think of the ECB as a "bankruptcy court" whose job is to settle the claims of all parties. The Greeks still have their sovereignty...they just don't have any money...
Blah...blah blah blah....IMF...Blah, blah, blah....Greece...Blah...blah blah blah...Germany...blah...blah...blah... blah...(in an hour simply move the "blahs", and repost under new Blah Greece Title).
Like the countries make a difference....Goldman books profit on the death of countries perferable they make even more if they advise the country on the way to death!
It is Alice In Wonderland time for Greece and the ECB
good post, zerohedge!
so much focus on greece.
italy, spain, portugal, ireland and FRANCE - would like to know what these broke nations are up to.
I'm sorry, but that is NOT correct
"...for all his pompous rhetoric, Mario Draghi showed that when it comes to determining the political fate of a nation, he will not hesitate to force capital controls"
capital controls are what the government does, not the NCB or the ECB. yes, Greeks were taking their funds out of Greek banks. yes, it was a bank run. yes, nearly every € they took out had to be re-supplied by the Greek CB through ELA from the ECB. yes, the ECB put a lid on that at 89 billions, and now allowed further 0.9 billion
nevertheless, capital controls are stuff that the governments do, not central banks. it was the Cypriot Government and now the Greek Government that closed the banks
yes, for fear they would go bankrupt. nevertheless, keep it straight, they could have let them go bust, for example. you can't have it both ways, dear author
"he will not hesitate to cut ELA support and so force the Greek government to contemplate capital controls for fear the banks go bust", here, now this would be more correct, and misses nevertheless how many national governors are necessary for a vote on such things
Your inane sophistry is becoming annoying.
some come here to learn, and some come here to pander their prejudices. meanwhile, you are free to skip over my comments, aren't you? I took this avatar for visibility, too
Yeah, the reasoning behind the avatar choice was pretty obvious. And hey, I'll even give you credit for staying on message all of this time.
Thing is, you spend ALL of your time squishing a handful of shit in an effort to find any value contained within, yet lose sight of the fact that you're always covered with shit.
IOW, you spend so much time trying to separate the incoherence of belief in state from it's natural form, that you seemingly have no idea of the level of support you provide to those who you try and weed out as "other non-state actors." (or vice versa)
All things are connected, regardless of how you seek to separate them within your mind, no matter how much you believe them to be distinct.
That said, I'll leave you alone now, as you do yourself and your beliefs a far greater disservice by your own words than my criticism could ever inflict upon you.
shit? I wish it was shit. it's shackles. don't you want to know how your shackles are made? it might give you the answer of how to take them off
yes, I am a very moderate statist. I believe it is possible to reduce the nefarious influence of too much state. but not while being ignorant of the exact details of it
meanwhile, no anarchist has ever achieved a territory devoid of state, military or warlords/mafia
...no anarchist has ever achieved a territory devoid of state, military or warlords/mafia...
Correct. Nature abhors a vacuum, and psychopaths lust for power and control above all else. Anarchy is even more of a pipe dream than communism.
That said, I'm of the minarchist libertarian mindset, after much careful consideration.
They could have nationalised the banks you mean? Not let them go bust, deposits have to be guaranteed (in a sane world). So do you honestly, straight up, no talking in circles, think that ECB would allow the banks to be nationalised?
For all intents an purposes, if I was in Greece, I would assume the worst that the banks will never open. I would abandon the Euro, and start using Dollars, Sterling, etc...
A very close friend just returned from the island of Rhodes. The situation is dire.
1. Withdrawals from ATM's next to impossible
2. Could not even buy goods by handing over US dollars
3. Workers working like dogs and employers giving them only a half to two thirds of their pay.
4. The local produce which is of high quality cannot be sold because hotels and cafes are importing cheap rubbish from questionable producers to feed their patrons.
5. Numbers of tourists is down quite noticeably.
So the net result is that if people are not working and not getting paid, then they are not spending which means that the government cannot collect taxes and therefore cannot meet the TROIKA's expectations.
If the TROIKA does not allow cash to flow there will be major civil unrest and Germany will be the instigator.
again, "on-plan" - EU wants civil unrest, civil war, major crisis - so it can "come to the rescue" and crown itself king of all of Europe - back to the middle ages - the era of King Schauble begins
I believe Schauble forgave his would be assassin but I would dare say that the Greek people will not forgive his would be assassin for not succeeding.
There is no doubt Greeks have to pay for their sins but Schauble is downright sadistic.
as are all kings & queens
Sadistic? Well, not many saints seek power over others...
... "... one of the preconditions imposed on Greece for a deal is that it signs into law European rules that would put euro zone authorities at the ECB and in Brussels, rather than Athens, in charge of identifying and closing or breaking up sick banks." ..."
... a tragicomedy translation: ...
... a Greek banker woke up in a Brussels hospital after a serious bailout accident and yelled, "doctor, doctor, I can't feel my legs!"
... the doctor scoffed and replied, "I know you can't, I've cut off your arms!"
So... when they want to nationalize the banks, they can simply repeal the legislation. It's Greek law, after all.
EU is "on-plan" - next they will subsume Spain.
It should be clear from how this financial and political debacle has played out, the ECB doesn't want any trouble anywhere else anytime soon. Unless they actually enjoy political acrimony, sleep deprivation, pissed-off EU members.
What Spain and Italy need to understand is, if this whole scenario could be rewound to a few years and many billions of Euros ago, Greece would be 86'ed on the spot.
The next country will not receive the same amount of international hand-wringing, moral pontification and acronym-laced solutions.
Greece was Bear Stearns. Italy or Spain will be Lehman's.
Isn't it simple?
Greek banks = insolvent
If Greek banks are insolvent, then their assets = zero
If Greek bank assets zero, then any derivative instrument based upon any purported Greek bank "asset" = zero
Thus:
Insolvent Greek banks = default/failure to honor derivative financial instruments derived from underlying assets of Greek banks
If derivatives are worthless, then does that not cause system-wide cascading default implosion?
Hence, no "asset" held by any Greek bank can be written down or off.
Hence, from a western banking fiat currency point of view, ALL Greek bank "assets" must not be written down at any costs.
Thus, from the western banking fiat currency point of view, then, all solutions require new loans to repay existing loans from Greek banks, which new loans will be collateralized and secured and guaranteed for repayment by the Greek people into the future, as well as by pledges of sovereign Greek assets to secure the new loans. The only issue is debt service, i.e., so long as the Greeks can make the monthly payment, all is good, even if that monthly payment stretches into the future forever.
"then does that not cause system-wide cascading default implosion?"
no - because those in charge will change the rules yet again - redefine the definitions, etc
how are all those CDS's working out, eh ?
all just: paper - computer bits - and promises by criminals
Yes, the payments will last forever, or until the next Greek snap election. Whichever comes first.
"The problem in the world right now is that White Europeans have lost their bloodlust and their ability to make a vulgar display of power in the Colored Nations to keep the peace."
SALUDOS...
EU = Jewish creation ( http://englishnews.org/news-central/resources/resource-a-conclusive-repo... )
Goldman Sachs jews created the debt trickeration bomb for Greece and when the suckers signed the deal, the jews lit that fuse. ( http://www.realjewnews.com/?p=482 )
KNOW YOUR ENEMY !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
i didn't know Rothschild was jewish
yuck !
Capital Controls were imposed by the Greek Government,
after the greek banks ran out of money.
The ECB had to pump in 89 billion of emergency funds, just to keep Greece alive.
So fucking stop twisting the facts of this Greek crisis and what really happens.
Zero Hedge is starting to piss me off with its leftist shit agenta.
call it as it is and stop acting like a fucking moron.
If the ECB would stop ELA funds, what would happen to the Greek Banks?
Or is this what you would like to see ?
Are you that bored and desperate with your own lifes ?
Fucking Idiots!
WR;)
And are you desperate to save a pack of Banksters?
Anyone with actual deposits in Greek banks should have had them taken out by the day after Syriza was elected. What's left are necessary TRANSACTIONS -- payments from the government to employees and pensioners, and merchant transactions where the total input and output zeros out. Any decent accounting firm can do a better job of that than the banks have done. The private banks need to be killed, and replaced with a public financial transactions authority that puts credit into the system and keeps track of who pays what to whom. Bank shareholders and bondholders should hardly expect to see their capital back after the mess they've participated in making out of the system, and bank executives should all lose their jobs anyway.
THIS is what Draghi and his minions exist to prevent. The replacement of speculative profiteering with honest accounting.
BTW, most faeries are somewhere to the left of Lenin:
"Philosophical anarchism contends that the state lacks moral legitimacy; that there is no individual obligation or duty to obey the State, and conversely, that the State has no right to command individuals. .. ." (Wiki).
Mr. Rose.....
Yes, that is exactly what anyone who gives a care about the PEOPLE of Greece wants to see happen.
There is a term for this... "Iceland Em"......
"Leftist" is a made up term... nobody is really sure even what it means, but I am certain that people who use these "terms" are almost always rooting for the global control system.... Leftist, Rightist, republican democrat, patriot, politically correct, these are all "buzz words" that are supposed to jerk the emotions of the easily swayed FOOLS around in the direction that the ruling factions want them to move in.
But.. those terms are fast becoming "labels" for the genre of walking dead that are trying to convince themselves that "they've still got what it takes.
A pox on them.
Even if the Greeks only have 10 billion in deposits....somehow they will be able to take out 50 billion from their deposits....
If the Greek government is in any way similar to the U.S., then the Greeks can NEVER completely withdraw all their money from the banks and make themselves invulnerable to this blackmail. All government payments -- pensions, government salaries (I think about 45% of the workforce), social insurance offerings, etc. -- are probably direct-deposited to Greek banks, along with all government accounts being held in them. Remember the long lines of pensioners being allowed in to withdraw a pittance on specified days? Most of those people hadn't actually deposited their money into the account. Their pensions were directly credited on the right day of the month.
Given that the Greek public sector accounts for more than half of the acknowledged Greek GDP, there is no alternative for this money other than deposit in Greek banks. Meanwhile, the "grey" and "black" sectors operating in "cash-only" mode will grow apace, and alternate currencies such as Turkish and Bulgarian will be accepted in preference to electronic and other recorded transactions. One reason I keep advocating Grexit is that I suspect that the sheer amount of cash stashed under mattresses right now is enough to keep the economy moving for months.