ECB LTRO 2: €529.5 Billion As 800 Banks Ask For A Handout, Total 3 Year ECB Liquidity > €1 Trillion

Tyler Durden's picture


The results for the second European 3 year discount window operation, pardon LTRO are in, and the winner is...


Since the expected range was €200 billion - €1 trillion, and just above the median €500 billion, this is clearly within expectations, however notably less than what the Goldman investor survey expected at €680 billion. What is certainly scary is that the number of banks demanding a hand out was a whopping 800, well above the 523 from the first LTRO: clearly many banks are capital deprived.

While unscientific, the fact that LTRO 1 saw €935.4 million, while LTRO 2 was at €661 million per bank, is probably not good at least optically, as it dilutes the average impact of the operation.

The ECB will now collect 1% on a total of €1.018 trillion. We wish the banks happy trails in finding way to monetize this in some carry trade opportunities.

Next the focus will be on how to spin this data as favorably as possible since both a lower and higher than expected number have been prerinsed favorably. And now, the easing focus shifts from Europe which has accepted about as much worthless collateral as it possibly can realistically, to the US, and Bernanke's testimony later today. Unless the Chairman somehow convinces the market that the easing theme will continue, the market, long rising on a wave of global central bank liquidity, will be in for a rude awakening.

Kneejerk market reaction to fade the news. Expect many more kneejerks before the morning is over.

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Wed, 02/29/2012 - 06:29 | 2207182 lizzy36
lizzy36's picture

Only 523 banks asked for handout first time around.

Less stigma more desperation this time around. 

Wed, 02/29/2012 - 06:33 | 2207186 HD
HD's picture

Hey Lizzie - working on another article?

Wed, 02/29/2012 - 08:34 | 2207356 bdc63
bdc63's picture

I'm thinking about changing my last name to "bank" ... I sure could use a 1% loan right about now ...

Wed, 02/29/2012 - 06:52 | 2207201 Ghordius
Ghordius's picture

and more dependency on the ECB - which makes this central bank of central banks more powerful.

this means that the time-tested Italian method of "convincing" banks to buy more sovereing debt will get more "grip". and the more the banks are willing to follow the ECB's "advice", the better they will be treated with liquidity in squeezes and a squinted eye when they show up trashy collateral

Godfather Mario makes only offers you can't resist, you see?

which just reminds me that what many people don't understand is that while the FED is strongly "infested" by the US megabanks  here in Europe we have a tradition of "dirigisme" from the central banks (and treasuries) to semi-captive banking systems.

Mr. King of the Bank of England is threading on this tradition when he asks for more "dictatorial" powers of oversight. he asked Parliament for more broad powers of "just saying to a bank: I don't like the way you make business, change it" (paraphrased, but not much)

Wed, 02/29/2012 - 07:03 | 2207235 Fips_OnTheSpot
Fips_OnTheSpot's picture

How about the stigma of paying back 30bn interest? (3yrs on 1trn total LTRO)

Wed, 02/29/2012 - 07:10 | 2207245 Ghordius
Ghordius's picture

for a banker, the amount is less relevant than the price. which is 1%. now, how many mortals you know that are allowed to take up 3 years loans at one percent in a forced inflationary environment? so the price is "right", and if they still manage to lose money in three years, well, until then how much further in the game will the FED be?

Wed, 02/29/2012 - 07:10 | 2207246 Iconoclast
Iconoclast's picture

They don't pay it back in an ever increasing money supply..little people pay back debt..

Wed, 02/29/2012 - 07:25 | 2207270 Reggie Middleton
Reggie Middleton's picture

What is certainly scary is that the number of banks demanding a hand out was a whopping 800, well above the 523 from the first LTRO: clearly many banks are capital deprived.

Understatement contest?

As excerpted from Cascade is to Domino as Greece is to Portugal as LTRO 2 is to...

Well, I've warned about this last year and even went so far as to not only issue forensic reports on the banks, insurers and countries which I feel would be most affected, but have even offered downloadable models to allow subscribers and even some of the free readers to calculate their own opinions. Reference the following models with their varying degrees of depth...

  1. BNP Exposures - Professional Subscriber Download Version - A full forensic look at both liquidity (funding sources vs liabilities) and solvency (writedowns)
  2. BNP Exposures - Retail Subscriber Download Version Calculates sovereign debt writedowns vs tangible equity
  3. BNP Exposures - Free Public Download Versionhot A freebie that definitely gets the point across.
As you can see from the screen shot below, just putting in today's writedowns, after effective recovery standing behind the ECB and the IMF (yeah, let's not forget to factor in reality), and not even bringing much into the discussion outside of the PIIGS debt, BNP still has a significant tangible equity hit. Now just imagine a cascading default which will assuredly go outside of the PIIGS confines and most definitely ding France something awful and you will find the equity slasher's blade will be bloody.
One place to look for pain in the cascading PIIGS default is France, as quoted last summer...

Wednesday, 03 August 2011 France, As Most Susceptble To Contagion, Will See Its Banks Suffer

In case the hint was strong enough, I explicitly state that although the sell side and the media are looking at Greece sparking Italy, it is France and french banks in particular that risk bringing the Franco-Italia make-believe capitalism session, aka the French leveraged Italian sector of the Euro ponzi scheme down, on its head.

I then provide a deep dive of the French bank we feel is most at risk. Let it be known that every banked remotely referenced by this research has been halved (at a minimal) in share price! Most are down ~10% of more today, alone!

I also provided a very informative document for public consumption which clearly detailed exactly how this French bank collapse thing is likely to go down: File Icon French Bank Run Forensic Thoughts - pubic preview for Blog - A freebie, to illustrate what all of you non-subscribers are missing!

BNP Paribas

BoomBust BNP Paribas? as excerpted...

For those not familiar with the banking book vs trading book markdown game, I urge you to review this keynote presentation given in Amsterdam which predicted this very scenario, and reference the blog post and research of the same:


Wed, 02/29/2012 - 07:28 | 2207272 Reggie Middleton
Reggie Middleton's picture

Who needs money and what for?






Wed, 02/29/2012 - 08:14 | 2207328 boiltherich
boiltherich's picture

Just curious RM, when we had our massive bankster theft.... I mean bailouts, seems to me that Eurozone banks got a decent sized chunk of the money, I don't see where US banks got any of the latest bankster haul out of the ECB, what I am wondering is if any of the euro banksters needed some of that dough to repay the Fed/treasury?  You hear anything about how much of the ECB largess has ended up in the USA? 

Wed, 02/29/2012 - 08:38 | 2207362 bdc63
bdc63's picture

very good question ... it would be nice to think that the FED is getting paid back for SOMETHING -- ANYTHING -- and is actually trying to reduce that balance sheet that they've allowed to triple ...

Wed, 02/29/2012 - 06:33 | 2207187 Fanatic
Fanatic's picture

Cash for trash, bitchez.

Wed, 02/29/2012 - 06:36 | 2207189 superflyguy
superflyguy's picture

Gold and silver made a nice move


Wed, 02/29/2012 - 06:38 | 2207190 Racer
Racer's picture

800... they should let them all go bust....

stop throwing stolen pensioners and workers money into bankster black holes


chart looks like someone trying to shock a cardiac arrest

Wed, 02/29/2012 - 06:37 | 2207192 qussl3
qussl3's picture

More bidders with less eligible collateral?

Clearly the banking system is solvent.

This is going to be impossible to unwind.

LTROs to infinity.

Wed, 02/29/2012 - 06:41 | 2207199 lizzy36
lizzy36's picture

The desperate bidders issued their own colleteral to themselves.

According to Reuters:

Italian banks have issued nearly 40 billion euros of fresh state-backed bonds
that they could use as collateral in exchange for cheap three-year European
Central Bank loans at an auction on Wednesday, Reuters calculations show

Contrary to what happened in December, a larger group of mid-sized Italian
lenders has now issued state-backed bonds, the data show.

UBI Banca, for instance, has issued state-guaranteed bonds for a total of 6
billion euros. Mediobanca has issued 3.5 billion euros of state-backed bonds and
Banca Popolare di Milano has issued bonds eligible as collateral in the ECB
tender for 1.5 billion euros.

UniCredit, Italy's largest bank by assets, has issued a total of 12.5 billion
euros, the largest amount of a single Italian bank this time around

Wed, 02/29/2012 - 06:44 | 2207202 qussl3
qussl3's picture

Either the ECB or the other CBs end up as the bad bank.

Gonna be fun when they recap.

Wed, 02/29/2012 - 06:47 | 2207211 Ghordius
Ghordius's picture

this is the ECB's game since inception. for every dance move the FED makes, the ECB makes a smaller move

gotta dance as long as the music plays - and then rush for the golden chairs

Wed, 02/29/2012 - 06:39 | 2207195 SLOMO66
SLOMO66's picture

Hurm, I was kinda right... at least the number 800 showed up somewhere...

Wed, 02/29/2012 - 06:39 | 2207196 The Axe
The Axe's picture

i can hear Bob Pisshead say ,  Goldilocks 800 times

Wed, 02/29/2012 - 06:54 | 2207222 UP Forester
UP Forester's picture

....and sustainable 13,000 times....

Wed, 02/29/2012 - 06:40 | 2207197 oogs66
oogs66's picture

Goldman probably asked for the most money - they can't refuse cheap money

Wed, 02/29/2012 - 06:43 | 2207200 Kiwi Pete
Kiwi Pete's picture

So where did this money come from? Don't tell me they just created it out of thin air. I thought the Germans didn't go in for that sort of thing any more.

Wed, 02/29/2012 - 06:46 | 2207206 Piranha
Piranha's picture

it was created out thin air :)

Wed, 02/29/2012 - 06:53 | 2207220 Kiwi Pete
Kiwi Pete's picture

If it's that easy why am I still paying taxes? 

I wonder if any of that lovely loot found its way down under? Anyone seen a list of the lucky recipients?

Wed, 02/29/2012 - 09:32 | 2207461 alfred b.
alfred b.'s picture


That's the funny part, both Oduma and tax-cheat Gethner said it would be "trickling down".       For the banksters, I think it's called 'laughing all the way to the bank'. 

Buy physical gold and silver now!!!

Wed, 02/29/2012 - 06:50 | 2207213 The Swedish Chef
The Swedish Chef's picture

It was created out of thin air. =)

Wed, 02/29/2012 - 06:57 | 2207225 Ghordius
Ghordius's picture

of course out of thin air! what do you want, an EURUSD at 5.000 ?

velociraptor-riding-half-naked-hot-nazi-girls attacking the US? ;-)

there is nothing mythical about Germans - except the myths of the propaganda in the US

Wed, 02/29/2012 - 07:01 | 2207233 Hobbleknee
Hobbleknee's picture

You thought wrong :)


Wed, 02/29/2012 - 08:32 | 2207348 schadenfreude
schadenfreude's picture

You know that Weber and Stark have left the ECB and Goldmanite Draghi rules the ECB now? Asmussen has been sent by Germany to the ECB. A great bankster lobbyist asshole. Everything is fine, please move on.

Wed, 02/29/2012 - 06:46 | 2207208 Kevlar Akubra
Kevlar Akubra's picture

There once was a bank in Nantucket

That looked like it might kick the bucket

The boss said with a grin

As he wiped off his chin

The government tit, we must suck it

Wed, 02/29/2012 - 06:50 | 2207214 Poor Grogman
Poor Grogman's picture

Sucking on the teat of a dying cow more like it...

It's a dying art...

Wed, 02/29/2012 - 06:47 | 2207209 Poor Grogman
Poor Grogman's picture

We are all going to be financially engineered no matter if we like it or not.

The gods are laughing at us....

Wed, 02/29/2012 - 06:48 | 2207210 The Swedish Chef
The Swedish Chef's picture

We need a new expression. Only beings with knees can have "knee jerk reactions". Machines have...circuit jerk reactions? 


LTRO wasn´t the Keynesian MDB Robo-Trader wet dream I hoped for. No trillion, UBS... But still, it´s good hopium and it´s absolutely a crutch for the uptrend. Don´t moan, just ride it.

Wed, 02/29/2012 - 06:49 | 2207212 Bangin7GramRocks
Bangin7GramRocks's picture

They always invent the money! That's why I am not so scared. As long as everybody agrees to play the game, it will continue for many years. The ECB doesn't have this money. Either does the fed. But as long as the world says its ok, when then its ok. Climb out of your bunker, sell some of your arsenal and buy a new IPad.

Wed, 02/29/2012 - 06:50 | 2207215 ZeroIQ
ZeroIQ's picture

Any ideas what the brent and wti will do now?

Wed, 02/29/2012 - 07:45 | 2207295 slewie the pi-rat
slewie the pi-rat's picture

here's your 3rd post!  hi, zero!

in the macro sense, these high oil prices really kill the farmers

on tuesday: oil softens, protein (soy, wheat, cattle) strengthens

centralPlanningTM 101! 

Wed, 02/29/2012 - 06:51 | 2207217 o2sd
o2sd's picture

How is taking out a loan (even at ZIRP) from the ECB, considered to be raising capital? Isn't a loan, by definition, NOT capital?

>> clearly many banks are capital deprived.

Don't you mean spread deprived? I thought the point of LTRO was to save the banks from spread compression that came about from duration problems after the GFC, as banks had been funding their loan books on shorter and shorter durations (because of widening spreads between the short and long end of the curve during the credit bubble).

So push funding out from 1Y to 3Y and pray that the default rate on their loan books doesn't blow out. The (faulty) assumption in this misguided stupidity is that in 3 years the economies of EU will have changed structurally and people are gainfully employed doing productive work. BWAHAHAHAHAHAHAHAHAHA.

Wed, 02/29/2012 - 07:00 | 2207229 Hobbleknee
Hobbleknee's picture

Where can I set up a "bank" quickly?

Wed, 02/29/2012 - 08:01 | 2207313 wandstrasse
wandstrasse's picture

Write 'BANK' on cardboard and fix it on your PM stacks... there you have it.. this is even a CENTRAL bank.. just be a bit more patient..

Wed, 02/29/2012 - 09:36 | 2207488 Hobbleknee
Hobbleknee's picture

But wandstrasse, only a fool would use real money.  I just want a fake bank, like all the other banks, so I can suck the bailout tit for easy money.

Wed, 02/29/2012 - 07:12 | 2207249 surf0766
surf0766's picture

So when the Fed stepped in that Wednesday night to open the swap lines, Europe was going under? I believe it was in November .. Correct?

Wed, 02/29/2012 - 07:19 | 2207256 supafuckinmingster
supafuckinmingster's picture

Awwwww sheeeeeeeeeeeeeeeeeeeeeeeeeeet!!

Wed, 02/29/2012 - 08:00 | 2207311 slewie the pi-rat
slewie the pi-rat's picture

what are the categories to get to the net amount, again?  rolled over?  carry trade?  redeemed or something? then some net number to the LTR02 for a bank, of which there were a "whopping" 800

so much for "stigma"

the troops have been ordered to dance with the captain's daughter at the remote outpost;  they comply;  so what?

just want to make sure the 529.5 Bil EUR is the net #;  not sure...

...for charts as complicated as we were looking at 24 hours ago, this seems deceptively simple to this pi-rat...

have all the precincts reported fully? 

Wed, 02/29/2012 - 13:42 | 2208655 slewie the pi-rat
slewie the pi-rat's picture

EUR 311 Bil = as predicted!

Wed, 02/29/2012 - 08:21 | 2207335 cnhedge
cnhedge's picture

it is lower than expected, clearly not good for gold.

Wed, 02/29/2012 - 08:26 | 2207342 alwaystoolate
alwaystoolate's picture

C'mon, you do not have to be "desperate" or "capital deprived" to take advantage of an offer like this.

It is cheap money. Who would not like to get some?

Wed, 02/29/2012 - 08:32 | 2207350 The Swedish Chef
The Swedish Chef's picture

From Bloomberg: 

"Patrick Legland, head of research at Societe Generale SA, said in a Bloomberg Television interview today, referring to the ECB loan operation. “This is very good. What we need is step two -- additional measures to support the economy.”


A trillion isn´t enough. MOAR!!!!

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