A SWIFT Denial - How In Europe, Even Admission Of A "Plan B" Is Equivalent To Failure

Tyler Durden's picture

While we have long known that the drachma, and recently the lira, have seen significant "when issued" interest by institutional clients desiring to hedge their currency collapse exposure, and thus early markets by various trading desks, little did we realize just how destabilizing this fact to the system would be, at least according to SWIFT. According to the WSJ, this organization, best known for making an abrupt appearance any time one wishes to do a wire transfer, then promptly disappearing until the next such instance, ended up promptly shutting down any Plan B optionality when "at least two global banks took steps to install back-up technology systems that could handle trades in old European currencies like drachmas, escudos and lire... quickly found, is not so easy in a financial world that is trying to both exhibit confidence in the ailing euro and—just in case—plan for its possible demise. Technology managers at the banks contacted Swift, the Belgium-based consortium that manages the network used in financial transactions, said people familiar with the matter. The banks wanted Swift's technology support and the currency codes that would be necessary to set up the backup systems." And got promptly rejected: "Swift declined to provide some information for such contingency planning, including whether old codes could be used in the system, said the people familiar with the matter." The reason is that in Europe, the mere admission that Plan B is a possibility, apparently set off a chain of events that makes Plan B an inevitability: "...officials there feared that releasing the information could fuel further doubts and instability in the euro zone."

And so Europe is left to fend on its own, with the mere mention of the possibility of failure being completely ignored, as the mere contemplation of failure is not only no longer an option, but apparently an outright admission of defeat. Needless to say, the fact that European banks have no way to hedge anything any more, CDS trading having been killed, thank you ISDA, and now supervisory bodies themselves telling banks to not even consider Plan B, is enough reason why the LTRO will be an abysmal failure.

Because one does not need to be a rocket scientist to realize that when everyone is telling you that even Plan B is improper, then it is all too clear there is absolutely no Plan Whatever.

As the WSJ captions it best:

It is a relatively minor setback for banks, as they look at everything from loan agreements to the safety of their branch staff in the event of one country's withdrawal from the euro currency.


But it illustrates the road blocks that politicians, banks and companies in Europe face as they attempt to simultaneously prepare for a euro-zone break up while assuaging market fears.


"As soon as you start contingency planning   . . . it can become a foregone conclusion," said Alastair Newton, senior political analyst at Nomura PLC.  "But if things go wrong and you don't have plans in place, you're in trouble."

Kinda like Jon Corzine, who bet it all on double zero, and found out the hard way that the lack of hedges coupled with the realization that one is either not Too Big To Fail, or, even worse, Too Big To Save, can lead to very hazardous consequences for one's health.

In the meantime, the doomed European continent can best be described by the following bird, which in our opinion should become the Eurozone's failed neo-globalist symbol.


European Central Bank President Mario Draghi this past week said that such speculation about the euro's demise is "morbid."


Nevertheless, governments, finance firms and corporations have been quietly stepping up plans in the past several weeks to prepare for a worst-case scenario.


The Financial Services Authority, the U.K.'s bank watchdog, has sent letters to the country's major banks asking for updates on their level of preparedness, and a similar dialogue has begun between banks and regulators in the U.S. in recent weeks, said the people familiar with the matter.


The U.K. Foreign Office has begun making contingency plans to evacuate U.K. residents from Spain and Portugal in the case of bank meltdowns in those countries, said a person familiar with the matter. In a sign of concern over stirring panic, a spokesman was tight-lipped about details apart to say that office is always preparing for all types of scenarios.


In another sign of escalating fears, some corporate firms with operations in Greece and elsewhere in Southern Europe have begun transferring their cash out of Greece on almost a daily basis—compared to the normal two-week interval—as a precaution against a sudden loss in value if currencies are revived, said a banker familiar with the companies' transactions.


Prepping their systems to handle codes for old European of currencies is one way banks are taking steps to buffer themselves against major business disruptions if any country suddenly leaves the euro zone.

As to the specific nature of the problem at hand, which very soon will come front and center:

One question banks have, and have not been able to clarify, is whether codes for now-defunct currencies, such as GRD for the Greek drachma, will be valid in the current Swift system.


A Swift spokesman said the company is ready to take whatever actions are required to maintain normal operations, but that "it is not appropriate this time for Swift to comment on issues specifically associated with the euro zone."


If a new currency emerges, it is handled by a maintenance agency affiliated with the International Standards Organization. A spokesman for that agency, SIX Interbank Clearing Ltd., said the agency has several projects looking at "dire scenarios" but the contingency plans for such scenarios have so far remained confidential.

Unfortunately by the time it "is appropriate to comment" it will be too late, as by then it will be merely the latest confirmation that everything the world's voodoo priests (f/k/a economists) have taken as gospel and sacred writings for so many decades, has been dead wrong. Only instead of quietly admitting their failure and exiting stage left in complete humiliation but with some hope for fixing the system, they would rather leave the proverbial flood in their wake, and a world completely destroyed out of blind adherence to a broken economic "theory."

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GeneMarchbanks's picture

'European Central Bank President Mario Draghi this past week said that such speculation about the euro's demise is "morbid." '

Mario remembers the days when 20,000 lire only got you cafe latte. Those days were anything but  morbid.

'The Financial Services Authority, the U.K.'s bank watchdog, has sent letters to the country's major banks asking for updates on their level of preparedness, and a similar dialogue has begun between banks and regulators in the U.S. in recent weeks, said the people familiar with the matter.'

Interesting... did the FSA include anything about hyper-hypothecation? Because that might earn them the title of 'watchdog' otherwise they're nothing but cheerleaders of a collapsing corrupt system.

Sudden Debt's picture

Actually, 20000 lire / 100 x 3 / 40 = 15 euro = 19,5 dollar
Even starbucks doesn't charge that for a coffee, let alone 10 years ago.

akak's picture

Actually, 20000 lire / 100 x 3 / 40 = 15 euro = 19,5 dollar

$19,500 for a cup of coffee?  Whoa!

I knew that prices in Europe for almost everything were higher, but damn!

TheFourthStooge-ing's picture

In the Eurozone, math is pointless, thus the radix character is a comma instead of a dot.


Ahmeexnal's picture

PM pits have opened for a while, yet silver is still flat.

Am I missing something?

Real Money Wins's picture

Just keep you eye on that floating gold/silver ratio!

User 3461's picture

I suspect the reaction to the posibility of the US returning to a silver-back would be met w/ similar resistance from the guys in charge of ruining the money.

akak's picture

math is pointless

My sister certainly felt that way about algebra in high school.

JPM Hater001's picture

All you folks so far gotta get new materials.
Now off yo Toy's R Us.

akak's picture

Hey, gimme a break --- I was drunk on turkey, gravy, potatoes and pie, and all the blood was rushing to my stomach.  You can't expect our best wit under such conditions!

TheFourthStooge-ing's picture

Yeah, and I was really high because slewie and I have been sparking up the peace pipe and passing it to everyone within reach; so high, in fact, that I thought the pun about pointless Eurozone math and a comma instead of a decimal point was really funny. Yep, that high.


Non Passaran's picture

Yeah but their calc is BS. That used to be 1-2 bucks IIRC.

PulauHantu29's picture
Hyperinflation History: When Hard Cash Goes Soft by Credit Suisse

Andreas Schiendorfer, Online Publications


"A kilogram of bacon cost 20 trillion dinars in Serbia in 1993. In 1946, Hungary released the Szazmilljo B.-pengö (100,000,000,000,000,000,000), the banknote with the most zeros in history, and in Germany, an egg cost up to 150 billion marks in 1923. These are just a few examples of the history of hyperinflation, a condition in which prices increase rapidly as a currency loses its value. There are many modern-day cases as well."



Buck Johnson's picture

There afraid to plan because the plan will make what you don't want to happen.  If they don't plan then they are out on a limb with nothing and everyone demanding something.  It's over and they are afraid of saying it's over, because once they do the first one out gets the better deal and it goes down exponentially from there.

Sudden Debt's picture

I don't see any birds in that picture... Is this the kind of picture where you need to stare at for hours to recognize stuff?

Schmuck Raker's picture

"I don't see any birds..."

Because you are IN Europe. :)

Snakeeyes's picture

Of course, the Euro zone will break up. They are just kicking the can down the road ,... like us!

Look at the crazy math of OUR government about paying for the 2% delay in social security tax!

Congress/Administration Allows Taxpayers To Keep 2% More Of Their Paycheck For 2 Months – Requires Almost 1 Billion Mortgage Refis and Purchases To Fund


francis_sawyer's picture

On a long enough timeline... Kicking the can down the road [INSERT OCCAM's RAZOR HERE]...

akak's picture

Hey Leo Kolonasskiss (whose ghost undoubtedly still haunts ZeroHedge), get ready to collect your pennies-on-the-dollar "yields" from your Greek bonds in drachmas, not euros.

pkea's picture

Note that Portugal,Italy and Greece are expected to leave...doesn't mean there will be no euro in some form. Some UK banks will break the neck on EZ short n just a few couple of months

Azannoth's picture

The Bankers and Politicians are petrified that once Humpty 'Ponzi' Dumpty hits the ground they will never be able to pull him together again

Non Passaran's picture

The new currency could be called the Neuro, as in neurotic

ucsbcanuck's picture

Well, when that's the situation, you know something is going to pop in Q1 2012

bob_dabolina's picture

Momma says that Europe is all ornery because they got all them teeth and no toothbrush

Georgesblog's picture

Any fallback position from a solution to the problem is failure. What is lost in the transition to national currencies is that there will be an intrinsic need to defend those national currencies. It could be no-holds-barred conflict in the global markets.


Seize Mars's picture

Such a waste of time. So stupid. Central planning costs everyone their quality of life. I really think some people have been conditioned to believe that we actually need central planners. What a laugh.

Fish Gone Bad's picture

Central planning came about because people let it happen.  Believing that all of our elected leaders have the peoples' best interest in mind is so incorrect as to not even be considered wrong.  Yes there are some good people out there.  Then there are those who just go along with the flow.  Then there are those who know how to make money for themselves.  So the sell outs and the go-alongers sell their votes and taah-dah! central planning happens.


killedbyshortvol's picture

Central planning is a manifestation of arrogance by people who don't know that, in complex environments, it is often better to just do nothing.   

francis_sawyer's picture

...or sometimes it just so happens that they're just pussies...


SHRAGS's picture

I really think some people have been conditioned to believe that we actually need central planners.

99% of people I come in contact with, accept, no expect central planning.  They do not even understand there is an alternative. The propaganda & education machines have destroyed their critical thinking skills.

financial apocalyptic contagion's picture

u speak the truth seize mars. my housemate here at the ross b-school has full faith in the EU, the Congress and of all people- Ben Bernanke. acc to him we shud just trust these cunts for another year or so and they will "smooth out" the business cycle n get us to the good old days. Me and others waste at least 3-4hrs a day trying to fix the guy but to no avail and unfortunately most people r like him. half my friends on fb think ZH is a propaganda website trying to sell stuff by promoting doomsday fears.
WTF oh he thinks Ron Paul is crazy as a bat and says everyday how Obama is our savior and how the republican arse-holes r ruining this country.
Fuck socialist liberals

Ron Paul 2012

Dr. Kananga's picture

Have to say, there's a lot of socialist liberals saying to hell with Obama W. Bush too. You don't hear about them or their views because they don't fit the authorized political narrative (like Ron Paul's candidacy.)

Signed, a life-long liberal commie Dem who's going to vote for Paul.

And good luck with your friend too--don't give up--it can take a while to get the blinders off.


StychoKiller's picture

Once their own paycheck(s) start to bounce or they find themselves in possession of a 101K (instead of a 401K), their minds will be forced to face reality -- but by then, it will be too late, as we all know.

Peter Pan's picture

My late father would often say that the law could to some extent assist you against thieves and liars but it could not provide any assistance in dealing with wankers. And believe me when i say that wankers are the ones that drive you crazy. So i know how you feel about your friend because we all have a number of them that are like your friend. One of them was so sure of himself and Europe's rescue plans that he bought Greek bank shares in July which have since fallen by 75 per cent. He still doesn't admit his mistake.

StychoKiller's picture

Being stupid is NOT against the law, unfortunately!

Return2Sanity's picture

Below is the best line of argument I know to reach liberals. Usually they agree with the first paragraph, but are skeptical about the Fed's role, so you say “Well then what's your answer? Can you show me any candidate who's promising to prosecute all of the fraud and illegal activities?”


In 2008 our economy nearly collapsed, but the Federal Reserve and the government bailed out the banks. We were told that the Dodd-Frank bill would make the system safe. Did it? MF Global just went bankrupt and as much as $1.2 billion of customer money just disappeared, even though it answered to four different regulators. Its CEO was a major fund raiser for Obama. The government helps out its banker friends while working against the best interests of the people. More regulation is useless if it's not even enforced.

The Federal Reserve is the root of the problem because the Fed makes lots of cheap money available to the financial industry. The financial industry uses it to make tons of profit that go into campaign contributions. Because of their dependency on these big contributions, politicians are rewarded for making laws that favor the financial industry and for ignoring the illegal and unethical things they do.

The big banks assume that the Federal Reserve will always have their back—they believe that no matter how much risk they take or how much money they lose, the Federal Reserve will always open up the discount window and help them out. Same for the US government—they're acting like the Federal Reserve will always be the backstop for their irreponsible spending. They think that no matter how out of control they get with the budget, the Federal Reserve will step in with an interest rate cut or a Treasury bond-buying program to save their backsides. Until we break the cycle, the financial elite will keep getting more powerful, and the government will become increasingly corrupt.


dcb's picture

As a li8beral who believes everything you wrote in the poswt, I am afraid I fail to see what liberal/ Vs. conservative has to do with this view point. in fact the vast majority of the republicn field is very pro federal reserve. you self constructed view of the world does not fit the facts.

TheFourthStooge-ing's picture

You are correct - liberal and conservative have become meaningless terms whose only utility is as labels for pigeonholes into which people can be grouped and then set against each other. The same is true for republican/democrat and left wing/right wing.

These labels are constantly reinforced by all of the various corporate media, because keeping the American public divided and quarreling is the easiest way for the War Party to maintain control. As long as Americans continue to see their struggles as pigeonhole vs. pigeonhole (left/right, liberal/conservative, republican/democrat) instead of Americans vs. corrupt authoritarian occupational government, the War Party has nothing to worry about.


ucsbcanuck's picture

"Fuck socialist liberals" - don't even think your housemate is socialist liberal. Just plain old deluded. I wouldn't even waste energy on him. Talk about waste of a BBA/MBA - the guy can't even accept an opposite viewpoint to his programmed thinking.

Honestly - I don't think we will have Mad Max. However, 2012 will be a bad year and many will be hit by poverty and suffering around the world, and we are in for a significant amount of pain one way or the other. We can't keep kicking the can. There will be a tremendous amount of wealth destruction, but we'll keep our most basic infrastructure.

Hopefully we will use this opportunity to build Bretton Woods part 3, but I'm not betting on it.

sosoome's picture

"... some people have been conditioned to believe that we actually need central planners."

True. Most people, however, have been conditioned to not think there is central planning.

Non Passaran's picture

Like the dude who last week pulled the mic on Schiff in the middle of an interview

dcb's picture

The vast majority here while "correct" in their views really don't understand why they are correct. I agree that central planning is  aproblem, but it isn't the problem. if the central planners were moving to break up the3 too big to vfail banks and seperate their functionality,l then central planning woould be a good thing. the problem is the central planning is that it is working and spending productive resouc=rces in order to maintain a dysfunctional system we would be better without. the problem isn't central planning it is smple corruption of the state from finance money and a captured system.

bankonzhongguo's picture


No international money transfer.

No bank.

No dice.



7thCardinal's picture


The Five Stages Of (Euro)Grief :
  1. Denial and Isolation. <-- We are here
  2. Anger. 
  3. Bargaining. 
  4. Depression. 
  5. Acceptance.


I guess SWIFT is loosing a great business opportunity by turning down this request. Any takers?

Dr. Kananga's picture

Re: business op--I was thinking exactly the same thing.

"SWIFT won't answer the phone? No problem! Currencies R' Us stands ready to handle your transfer needs! Pick your currency, punch in the amount, and you're done! No currency rejected, no amount too big or too small! Download the iPhone app and you're on your way!"

Non Passaran's picture

Bitcoin :-)

A good opportunity for some UK company to jump in. And show the finger to the Eurocrats.

jonjon831983's picture

Wasn't there some news that some Bitcoin computers were hacked and it resulted in a currency devaluation as more Bitcoins were generated? (ie printed)

theMAXILOPEZpsycho's picture

ah, bitcoin! the biggest laugh of 2011!