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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lizzy36's picture

Only 523 banks asked for handout first time around.

Less stigma more desperation this time around. 

HD's picture

Hey Lizzie - working on another article?

bdc63's picture

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

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)

Fips_OnTheSpot's picture

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

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?

Iconoclast's picture

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

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:


Reggie Middleton's picture

Who needs money and what for?






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? 

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 ...

Fanatic's picture

Cash for trash, bitchez.

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

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.

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

qussl3's picture

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

Gonna be fun when they recap.

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

SLOMO66's picture

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

The Axe's picture

i can hear Bob Pisshead say ,  Goldilocks 800 times

UP Forester's picture

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

oogs66's picture

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

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.

Piranha's picture

it was created out thin air :)

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?

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!!!

The Swedish Chef's picture

It was created out of thin air. =)

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

Hobbleknee's picture

You thought wrong :)


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.

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

Poor Grogman's picture

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

It's a dying art...

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....

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.

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.

ZeroIQ's picture

Any ideas what the brent and wti will do now?

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! 

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.

Hobbleknee's picture

Where can I set up a "bank" quickly?

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..

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.

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?

supafuckinmingster's picture

Awwwww sheeeeeeeeeeeeeeeeeeeeeeeeeeet!!

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? 

cnhedge's picture

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

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?

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!!!!