It Begins: One European Bank Fails, Another One Needs An Urgent Cash Injection!

Secular Investor's picture

EuroZone

Interesting news this week as Belgium-based Optima Bank has been shut down by both the National Bank of Belgium (which also acts as the Belgian regulating body) as well as the ECB. According to the national supervisor, the bank  would have been unable to meet its commitments to its clients and was forced to cease all banking activities after some potentially fraudulent transaction were unveiled.

It’s surprising to see the main media have tried to keep this silent as even the website of the National Bank of Belgium didn’t bother to issue the press release in English (whereas all other press releases on the home page can be read in English). There’s no statement from the ECB either, nor has this news been translated on the English version of website of the state-owned national television station.

The situation is so bad the regulator has already immediately tasked the special fund organizing the Deposit Guarantee Scheme to start paying out the clients of the bank, even though Optima Bank hasn’t filed a bankruptcy procedure just yet. The urgency of the need to pay the clients does indicate the situation is extremely bad and even though it’s a very small one (it had closed the savings accounts division last year), there are two more important things you need to keep in mind.

Bank 2

Source: HLN.be

First of all, Optima was one of the banks which tried to attract new customers with sky-high interest rates. Suspiciously high, we might add. This reminded us of the Deutsche Bank promo in Belgium which also promised ultra-high interest rates on some of its products (as referenced on ZeroHedge here), as Optima clearly had a real need to see a cash inflow.

But secondly, and this is even more important, according to the official filings, the National Bank of Belgium had already effectively taken control of Optima Bank by appointing a ‘special commissioner’ to approve all transactions. Even though the NBB has only revoked the banking license just a few days ago, that special commissioner was already appointed in the first half of May.

That creates a completely new question. Are there other banks in the Eurozone which are under extremely strict supervision by the national (or supranational) regulators? If a Central Bank doesn’t even announce when a special commissioner is being appointed, how can the public be sure its deposits are safe? What else is going on in the Eurozone behind closed doors? Why did Banco Popular for instance need an emergency capital raise if it argued earlier it was strong enough to weather its real estate storm, sending the stock to a multi-decade low?

Bank 1

Source: Bloomberg

In fact, Banco Popular was one of the banks that had been definitively cleared by the European Central Bank in its 2014 study which was supposed to have a stricter overview of the entire sector. With one Belgian failing bank and a Spanish bank needing an emergency injection of 2.5B EUR, the credibility of the banking sector in the Eurozone has taken an additional hit, as Banco Popular still has one of the worst bad loan coverage ratios in the eurozone (the total amount of provisions accounts for less than 40% of the total value of the non-performing loans).

If you thought the crisis in the European banking sector was over, think again. Part 2 is just about to start.

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musicmaster's picture

The article is exaggerating. Optima was a small bank with some 10,000 savers that controlled 140 million euro. It had already decided a few years ago to end its banking activities and it had shrunk since (from a balance of 750 million).

The owner was known as a kind of cowboy entrepreneur and this was not the first time he had problems with regulators. 

It is not exactly clear why it was decided now to close this bank. But on balance I think that it is a positive sign that this kind of banks still exists and that banking is not totally controlled by a cartel of big banks.

Watson's picture

1. Optima is far too small to matter. In fact, allowing it to fail is a _good_ sign, not a bad one.

2. If you are bothered by Banco Popular, then, IMHO, you should be _very_ bothered by Unicredito.

Watson

lakecity55's picture

Black Swan?

I mean, it's almost always some bank like this going under, then we find out a bigger bank was underwriting them, they They go under, etc etc.

The fact that it's out of the MSM is verrry interesting, as Major Hochsteader would say....

jzcjca00's picture

Meanwhile, Bitcoin, the world's best-performing currency for 6 of the past 7 years, is up 58% year-to-date.  Remember, only hold in fiat those funds you can afford to lose.  The rest should be in Bitcoin.

TradingTroll's picture

I used to have Bitcoin. It was on my computer hard drive and backed up on a flash drive. The SSD hard drive failed. I went to use the backup and discovered it was corrupted. No data was recovered when I sent it to specialists.

 

I am not the only one having these issues.

 

I would dispute that Bitcoin is the best performing currency. Even the Chinese dont hold Bitcoin. Its used to flow funds. The more flow the higher the price. When flow drops then it crashes. Happened before, will again.

Equinox's picture

Backup on 1 flashdrive, thats like parajumping with a trashbag. 

 

RaceToTheBottom's picture

Banks should be only used as transactional entities in the same way that fiat currencies like the Dollar and Euro should only be used as transactional currencies.  Only put enough in each to get your through the month's transactional payments.

 

Store of value roles should be done in a different medium.

rhadamanthus's picture

Bitcoin (and Monero for privacy) will be the ultimate stores of value.

Winston Churchill's picture

Bitcoin as a MoE maybe, not a SoV.Same as fiat in spite of the tech nerd hard on.

Best you learn the diff.

Maestro Maestro's picture

Fuck you filthy banker scum.

 

Fuck fiat currencies which enable banker scum like you to screw us regular folk by stealing from us via constant devaluation and manipulation of fiat money.

 

My labor and my goods are not worth less one second later just because you filthy evil bankers say so.

OverTheHedge's picture

A few years ago, my bank was on strike. This mean that I couldn't withdraw cash. This went on for a few weeks, until I got bored (I was building a house at the time, so needed to pay workers & suppliers), and insisted on closing the account. Much consternation followed, and I had cash the next day. A good lesson learned, though - if it's in the bank, it's not mine, it's theirs.

....and its gone.

oncemore's picture

Soros is going to make some money.

lakecity55's picture

I am really eying his acquisition of over 1% of outstanding stock in Barrick.....

I'd lose no sleep if he dropped dead, but he does know how to position himself to make money.

Word is he came back to his office to take charge.

Oleander's picture

They will be issuing Spider-Man towels to all clients who would like their money back.

Bunga Bunga's picture

No, no, no, that's the only collateral left!

OverTheHedge's picture

There's going to be lots of newbies here who have no idea what Spiderman towels can be used for....perhaps the old guard can help out?

Darth Rayne's picture

Rules based resource allocation is fine, sustaining the unsustainable is foolish.

Strange old world. https://davidwatkinson.blogspot.co.uk/

Yancey Ward's picture

Well, when the chips are down you are forced to lie.

wildbad's picture

the insurance accounts tasked to save the depositors' cash are a serious weak link all around the EU.  the limit is 100k per insured but your wait is over a year.  this is a tiny bank but you see how the banksters are trying to minimize the "down time" to get cash into the hands of the few depositors left.

it is assumed that just two medium sized banks here in germany would empty the fund.

look out below

Kayman's picture

Let them fail. 

Attitude_Check's picture

https://translate.google.com/translate?sl=auto&tl=en&js=y&prev=_t&hl=en&...

 

google translate link to the announcement of the depositor and debtor withdrawl and payment freezing to save the creditors....

38BWD22's picture

 

 

 

Yes, it's now way past time to clean house.  It will not be pretty though.

 

Prepare by having assets outside the banks!

Arnold's picture

-

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Bought a Kevlar cup from the Interwebs about a month ago.

Though the family Jewels might be bruised, they will not be broken.

knukles's picture

Lotta retired Belgians in Waterloo Iowa.  Nice quiet place it is.