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Is The ECB Masking Accelerating Deposit Flight In Italy And Spain?

Tyler Durden's picture


While LTRO may have slowed the need for immediate asset sales and larger deleveraging in European banks, the two most significantly worrying trend concerns remain front-and-center - those of deposit flight and lending cuts. The latter remains a concern for the BIS, who note in their recent report, that lending curtailment by European banks focused primarily on risky (non-sovereign) and USD-denominated (EM mostly) debt as banks sought to reduce risk-weighted assets (RWA) to meet Basel III capital rules. It would appear though that banks remain in deleveraging (asset sale) mode, in anticipation of the end of ECB facilities down the road, which will become increasingly troublesome given the encumbrance of so many of their assets already by the ECB itself. What is most concerning though is the dramatic and accelerating deposit outflows from not just Greece but Italy and Spain (which just happen to be by far the largest 'takers' of LTRO loans).  


Spanish and Italian (SPIT) banks dominated the use of the ECB's LTRO facilities, while Finland/Germany/Luxembourg (FINGEL) banks took only modest amounts...


but the rise in the ECB's deposit facility shows that FINGEL dominated the additions while SPIT increased only very marginally...


As most importantly - Deposits are flooding out of SPIT banks...


In other words, as more and more deposits outflow from these two major sovereign nations' banking systems (notably to Finland, Germany, and Luxembourg apparently), the only way to fund bank liabilities (as long as the interbank market remains dead - which is likely given everyone's self- and projected-knowledge) will be the ECB.

And as deposits fall, the need to reduce assets can only accelerate problems within these large Spanish and Italian banks - especially as they replace liabilities with their own sovereign bonds in the reacharound carry trade - leading to an increasingly concentrated systemic risk concern in these banks. Should we see any more macro pain in Italy and Spain (which seems a given), the steepness of their bond curves will accelerate (anchored at the short-end by LTRO-fed carry trades and ECB SMP) until it becomes uncontrollable and the front-end snaps leaving margin calls and collateral damage for the ECB and the banks...

Charts: BIS


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Mon, 03/12/2012 - 12:34 | 2247508 transaccountin
transaccountin's picture

All funny fiat money. Like the funny numbers. Now go out and spend damnit!

Mon, 03/12/2012 - 12:41 | 2247542 Silver Bug
Silver Bug's picture

Of course they are.

Mon, 03/12/2012 - 14:36 | 2247946 trav7777
trav7777's picture

i dunno why these euro deposits are fleeing...the banking system is all euros from the ECB

Mon, 03/12/2012 - 20:09 | 2249034 smiler03
smiler03's picture

@ Silver Bug

Just to save anybody else clicking on your link, it says..

"James Turk - $400 Price Target for Silver". 

I hope so, and I hope Trav agrees!

Mon, 03/12/2012 - 12:41 | 2247543 JennaChick
JennaChick's picture

Forget currencies, buy gold! Here's the latest from Robert Mish who has been a precious metals dealer for nearly 50 years and knows what a gold bubble mania looks like:

Mon, 03/12/2012 - 13:05 | 2247630 847328_3527
847328_3527's picture

No currency is safe right now looks like....even my broker is telling me add to metal and oil ETFs.......

Mon, 03/12/2012 - 13:31 | 2247719 CrashisOptimistic
CrashisOptimistic's picture

Why do you have a broker?

Mon, 03/12/2012 - 14:16 | 2247862 donsluck
donsluck's picture

You can only legally trade paper through a broker, BUT, MFG demonstrated the implied license to steal, SO, get physical and forget paper.

Mon, 03/12/2012 - 18:08 | 2248730 tooktheredpill
tooktheredpill's picture

can't wait to click that link

Mon, 03/12/2012 - 13:25 | 2247698 nowhereman
nowhereman's picture

But, but, but, we're the worlds largest eCONomy, right?

We're in the drivers seat, aren't we?

Mon, 03/12/2012 - 19:50 | 2248997 Buck Johnson
Buck Johnson's picture

Trust me we haven't seen anything yet, Spain and Italy are on a knife edge and they will collapse.

Mon, 03/12/2012 - 12:34 | 2247510 devo
devo's picture

IMO the most important question to ask: is the Federal Reserve purchasing stocks?

I mean, someone is, and it's nobody I know...

Mon, 03/12/2012 - 12:37 | 2247524 SheepDog-One
SheepDog-One's picture

FED secret central banksters buying up every bond and stock it can....and no one sees this endgame playing out. Peek-a-boo! I see you!

Mon, 03/12/2012 - 12:38 | 2247530 Everybodys All ...
Everybodys All American's picture

The High Frequency Trade is most definately tied to the FED imo. They have figured a way to control the market or system with few people suspecting or knowing the difference. No way do the fundamentals of this slow of a growth projection manage this high of a stock price without the programmed trading.

Mon, 03/12/2012 - 12:45 | 2247562 resurger
resurger's picture



Mon, 03/12/2012 - 12:51 | 2247587 Quinvarius
Quinvarius's picture

It is amazing what you can do if you are willing to take unlimited losses because you have a printing press and no one checking your books.

It takes geometrically expanding effort and wealth to maintain our fiat currency system.  They can pretend that America has limitless wealth for them to syphon off with an expanding money supply.  But the fact is, there is nothing left for them to continue without just flat out printing. 

Mon, 03/12/2012 - 12:43 | 2247555 Quinvarius
Quinvarius's picture

Does it matter if they are doing it themselves, or if they are passing out free money for others to do it?

It doesn't really matter in the end.  Government interference is behind most bubbles.  Stocks are safer than paper money.  But as a measure of wealth in a non-nominal sense, they will do badly in inflation, and extra badly in the aftermath of inflation.  Historically, the only people who win in the end are those in gold and foreign currencies...Good luck finding a foreign currency that is going to make it.

At this time, you can only accumulate gold and wait to spend it after the dust settles on this experiment. 

Mon, 03/12/2012 - 12:56 | 2247589 devo
devo's picture

I think the RMB will be a good currency over the next decade. Anyone paying attention can see the US and China are trading places, and their standard of living is rising while ours is declining. That should lead to less exports and a consumption economy. They're accumulating a lot of gold, too, which one could assume is to back their paper and make the RMB the world reserve currency.

I'm 35, so I doubt I'll be alive to see the end game. I know everyone thinks it's close, but grandmasters can drag a game on for a long time...

Mon, 03/12/2012 - 13:04 | 2247626 q99x2
q99x2's picture

Not to worry. Plans are in place to kill most of of us before the dust settles. Shouldn't take more than a year or two max.

Mon, 03/12/2012 - 12:57 | 2247602 Hippocratic Oaf
Hippocratic Oaf's picture


and it will eventually break your mommas back

Mon, 03/12/2012 - 12:36 | 2247517 SheepDog-One
SheepDog-One's picture

Yea keep 'masking' everything as if no one knows....the world is now run like a babies game of peek-a-boo.

Mon, 03/12/2012 - 12:36 | 2247518 Quinvarius
Quinvarius's picture

Soon they will all learn to buy shovels instead of opening bank accounts.

Mon, 03/12/2012 - 12:37 | 2247522 Sandmann
Sandmann's picture

Draghi is Italian....he is probably unaware of the nature of the society he grew up in....

Mon, 03/12/2012 - 12:47 | 2247571 resurger
resurger's picture

i am fakuhsing on ze depozitz, let me seenk for a moment.

Mon, 03/12/2012 - 13:02 | 2247616 GeneMarchbanks
GeneMarchbanks's picture

That's funny I thought he was from Goldman...

Mon, 03/12/2012 - 13:58 | 2247794 earleflorida
earleflorida's picture

draghi is a GS's chameleon - a drag queen's whore,... that greases-up for, and as goldilocks, anxiously anticipating the next anal-leakage hemorrhoid north of the vatican's hellenic cheshire' grin

Mon, 03/12/2012 - 12:37 | 2247527 Amish Hacker
Amish Hacker's picture

All those euros leaving Spain and Italy are staying in euros, just jumping to another country. The real capital flight will occur when depositors abandon paper and move to phyz.

Mon, 03/12/2012 - 12:39 | 2247533 SillySalesmanQu...
SillySalesmanQuestion's picture

Thou shall not withdraw any deposit/security.

Shhhh...can you say...Bank Run.

Mon, 03/12/2012 - 12:41 | 2247545 ekm
ekm's picture

My cousin lives in Switzerland. She told me she has most of the money at Intesa San Paolo (italian bank). I told her to move the money out. She took my advise.

Mon, 03/12/2012 - 12:42 | 2247548 SheepDog-One
SheepDog-One's picture

Is she hot?

Mon, 03/12/2012 - 12:57 | 2247604 ekm
ekm's picture

Absolutely. But she got married in September  last year.......with an american. 

Mon, 03/12/2012 - 14:07 | 2247827 banksterhater
banksterhater's picture

she'll find out americans are scum of the earth.

Mon, 03/12/2012 - 14:20 | 2247880 donsluck
donsluck's picture

Incorrect, in this situation. American men are known the world over as the best husbands. And American women are known the world over as the worst wives. Word!

Mon, 03/12/2012 - 20:32 | 2249067 smiler03
smiler03's picture

You used the word "best" once too much and the word "worst" once too little. Otherwise, you're accurate.

Mon, 03/12/2012 - 13:02 | 2247618 ISEEIT
ISEEIT's picture

Any pics?

Mon, 03/12/2012 - 13:08 | 2247644 ekm
ekm's picture

Oh,no, no, no. Hot mediterranean girl though.

She used to work at UBS in Switzerland but she hated it.

Mon, 03/12/2012 - 13:21 | 2247689 kridkrid
kridkrid's picture

I think I can speak for everyone when I say we ain't buying a word of it without pictures.

Mon, 03/12/2012 - 13:30 | 2247715 ekm
ekm's picture



Mon, 03/12/2012 - 12:42 | 2247550 stant
stant's picture

mason jar federal biatchez. same intrest rate too

Mon, 03/12/2012 - 12:44 | 2247557 JLee2027
JLee2027's picture

Hoarding cash is a natural reaction to distrust of banks.

Mon, 03/12/2012 - 12:47 | 2247558 Shizzmoney
Shizzmoney's picture

Goes to show 2 things:

A) Those with capital in these countries, aren't stupid.  They probably read article here.  Get your shit out now, while the warning signs are there.  Wish I had same type of transparency of central fail before the Full Tilt Poker scandal!

Bank of Sealy, bitchez!

B) High unemployment/taxes/costs of living = less deposits/cash in the bank, just common sense. 

Where's that money all going to?  Usually to the people also lending it (ECB).

Mon, 03/12/2012 - 12:49 | 2247559 THE DORK OF CORK
THE DORK OF CORK's picture

IS LTRO mainly "domestic" banks buying domestic debt ? - if so  - is this a clear signal for the renationalisation of the European monetory ecosystem ?

Mon, 03/12/2012 - 12:45 | 2247560 SheepDog-One
SheepDog-One's picture

So then basically the next 'Greece' on deck is Italy and Spain...I just wonder when they officially kick off the festivities and announce 'Uh oh, we got trouble here'. 

Mon, 03/12/2012 - 13:05 | 2247629 Dick Darlington
Dick Darlington's picture

Just today Jun(c)ker and Strangle-Schauble were screaming "Spain is not like Greece". Clear sign Spain is in BIG trouble. Official denial is the classical sign. Reminds me abt the good old days when the head of europonzi, Mr Rehn, gave the kiss of death to Portugal by denying they have a problem. Two weeks or so later Portugal went tits up. Lol!

Mon, 03/12/2012 - 12:47 | 2247573 I am a Man I am...
I am a Man I am Forty's picture

Apple not so "iDisappointing", making all time highs yet again, Zerohedge iWrong on Apple as iUsual.

Mon, 03/12/2012 - 12:58 | 2247605 Village Smithy
Village Smithy's picture

No one here who knows anything has a called a top in AAPL. We have long since abandoned our state of disbelief. You can't enjoy a good fantasy movie if you keep asking questions pertaining to reality. Try watching (or reading if that's your preference) Game of Thrones. If you can handle a 13 year old girl surviving a funeral pyre and hatching 3 dragons' eggs then you are ready to play this Game of Ponzis.

Mon, 03/12/2012 - 13:25 | 2247700 Free Markets
Free Markets's picture

Actually one of the best series I have ever read.

Mon, 03/12/2012 - 20:50 | 2249124 smiler03
smiler03's picture

I am a Man I am Forty

Are you the reincarnated Robotrader?

Please say it is so!

Mon, 03/12/2012 - 12:48 | 2247578 bullet
bullet's picture

anyone watching the ES this morning...

volume data problems at the cme....only reporting a fraction of the volume

reason for the extra slow trade

Mon, 03/12/2012 - 12:51 | 2247590 flyingpigg
flyingpigg's picture

Interest rates in Spain and Italy peaked when the data in the above charts ends, in January.

I can't wait to see if the trend of money outflows continued or reversed in 2H Jan and Feb.

Mon, 03/12/2012 - 12:51 | 2247591 bugs_
bugs_'s picture

so they trust the euro but not the banks.

Mon, 03/12/2012 - 12:52 | 2247593 Martel
Martel's picture

When talking about deposit additions, you can take FIN out of FINGEL. It is Germany and Luxembourg where people park their funds, Finland hasn't exactly been known as a banking haven. Besides, GEL and SPIT somehow belong together.

The Finnish current account seems to be slipping into negative. In other words, Finland has been losing competitiveness vs. Germany during her time in eurozone, albeit at a slower pace than say, Spain or Greece. In case of return to old currencies, Deutschmark would gain more than any other of the current eurozone members. Hence, that's where the deposits are being made.

Mon, 03/12/2012 - 13:09 | 2247645 espirit
espirit's picture

Caymans are a nice place to visit before storm season.

Mon, 03/12/2012 - 21:06 | 2249170 smiler03
smiler03's picture

I really hate to say it and I sincerely hope that I am wrong but the next reserve currency will be the yuu yur ueurder oor oh err urr heru yoo yer

Deutsche Mark.

Cough cough, I love the smell of Munich the morning after, Beer should rule the world.



Mon, 03/12/2012 - 12:56 | 2247600 digalert
digalert's picture

To quote some famous know-it-alls:

gold just sits there

Yah, unlike a fiat, where one can perform magic with sleight of hand. Meanwhile my gold and silver just sit there...thank you very much.

Mon, 03/12/2012 - 13:01 | 2247611 Whoa Dammit
Whoa Dammit's picture

I think more than deposit flight is being masked... Seems eerily quiet given the Greek CDS default situation. 

Mon, 03/12/2012 - 13:01 | 2247612 Non Passaran
Non Passaran's picture

This is great news. Let's see them print or collapse!

Mon, 03/12/2012 - 13:12 | 2247660 espirit
espirit's picture

Print, bitchez, print.

Let the trickle down effect begin.

Wait, those aren't pennies from heaven...???

Mon, 03/12/2012 - 14:12 | 2247817 earleflorida
earleflorida's picture

no matter --- they'll just rename [as in the 30's & 70's] the 'federal reserve notes', the USSA Bank of Int'l Settlements"

there, fixed it for ya

Mon, 03/12/2012 - 13:01 | 2247614 whisperin
whisperin's picture

My concern is with the first chart as banks in these countries are essentially relying on the credibility of the central bank (ECB) much like our banks with the FED. What the ECB has demonstrated is that it will subordinate when necessary and reduce collateral standards at will. So why put ALL your funds on deposit with them. I think we might see some banks (both here and there) start putting a percentage into physical gold because as the asset quality of central bank collateral deteriorates so does the liquidity and fungibility of your deposits.

Mon, 03/12/2012 - 13:02 | 2247619 evolutionx
evolutionx's picture


also long periods

Mon, 03/12/2012 - 13:03 | 2247623 trilliontroll
trilliontroll's picture

As I said before we need a

10 000 000 000 000 € LTRO .

Keep on printing in the free world !

Mon, 03/12/2012 - 13:34 | 2247652 gwar5
gwar5's picture

Hair triggers and bank Runs, bitch-zzz.


I can't believe huge bank runs are not already happening.... especially since the entire world just had a front row seat to the government-assisted MF Global confiscation. That sudden wipeout of client money was like watching the first nameless yeoman on Star Trek getting killed off by the monster in the opening act.  Who's next? 



Mon, 03/12/2012 - 13:13 | 2247662 NobleSavage
NobleSavage's picture

After reading this article, I feel the same way Indiana Jones did when a 50-ton rock boulder was chasing after him.   This stuff is really PSIing me off.   

Mon, 03/12/2012 - 13:33 | 2247720 Dick Darlington
Mon, 03/12/2012 - 13:38 | 2247735 El Tuco
El Tuco's picture

Was speaking to someone from Italy the other day. They have been trying to sell a house for over a year for a very good price but no one can buy it because the banks have no money to lend. You can't get a mortgage in Italy anymore.

Mon, 03/12/2012 - 16:20 | 2248283 ArgentoFisico
ArgentoFisico's picture

I'm from Italy and confirm. Banks lend you money only if you already have it.. grazie!

But we have even worst problems: we have 21% IVA (VAT) on silver!

Mon, 03/12/2012 - 14:28 | 2247906 Canucklehead
Canucklehead's picture

Clearly the ECB is the bad bank.

The ECB will have a stranglehold on the PIIGS as it will own their banking systems.  Here's how I think it will play out.

The overarching analogy is boiling frogs in hot water.  You can't plop one in a pot of boiling water as it would jump out.  Slowly turn up the heat and you will boil the frog.

The ECB owns the TARGET system.  Any PIIGS country that wants to burn the ECB will need to give up access to TARGET.  For that reason, I suspect the ECB can slowly turn up the heat until the PIIGS are boiled.

If a PIIGS country burns the ECB, they are outside a payment transfer system and their "independent banking system" is Dead On Arrival.  Every country would simply turn on the deadbeat PIIGS country that burned the ECB and put the boots to trade with that country, or boots on the ground within that country.

If a critical mass is garnered within the EU to screw the ECB, the Germans et al can take their TARGET system and blend it with the United States and/or Britain.  Their contingent liabilities within the ECB would not need to be honored, or they could be paid off for pennies on the dollar.  As the remaining PIIGS countries and peripheral EU countries who side with the PIIGS need to develop their own system, it is expected they will try to resurrect TARGET.  They would need to honor the paper that they previously sold to the ECB.  Trade with those countries would be minimal if they screwed the ECB, and in turn caused harm to developed countries.

The end result is the PIIGS cannot default on ECB debt (and live).  All talk about walking away and re-starting their economies is a non-starter.  Any debt the ECB buys on their behalf is their debt.  The end result is eurobonds mean nothing as there is no collective backstop in the bad times.

Soon the ECB will own all the good collateral that lubricates the banking systems in the PIIGS countries.  Once that critical mass is achieved, the Sovereign State becomes a Provincial State reporting to an ECB overlord.

Deposit flight within the EU only accelerates this.  If the deposit flight moves to the United States, at some point they will own the ECB via the neo-TARGET system.

Mon, 03/12/2012 - 14:41 | 2247964 Nobody For President
Nobody For President's picture

The Trillion Euro LTRO in a fairly short time period came with unintended consequences (surprise, surprise):

LTRO Stigma = deposit flight.



So why is not Switzerland getting some (more) of this money?

Mon, 03/12/2012 - 18:47 | 2248838 Racer
Racer's picture

Why put your money in a bank at zero.... read BIG NEGATIVE to inflation rate of interest so they can loan shark it out/gamble it?


Take it put it under the mattress and buy gold! Far safer... I would rather let robbers steal it who would break into my house... they deserve the money more than the banksters!!!!!

Mon, 03/12/2012 - 19:05 | 2248892 zorba THE GREEK
zorba THE GREEK's picture

The Italians and Spanards taking their money out of their insolvent

banks only shows they are generally wiser than their American


Tue, 03/13/2012 - 02:11 | 2249674 cnhedge
cnhedge's picture

deposit flow is stalling the recovery.

Do NOT follow this link or you will be banned from the site!