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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transaccountin's picture

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

trav7777's picture

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

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!

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:

847328_3527's picture

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

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.

tooktheredpill's picture

can't wait to click that link

nowhereman's picture

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

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

Buck Johnson's picture

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

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...

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!

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.

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. 

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. 

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...

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.

Hippocratic Oaf's picture


and it will eventually break your mommas back

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.

Quinvarius's picture

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

Sandmann's picture

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

resurger's picture

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

GeneMarchbanks's picture

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

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

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.

SillySalesmanQuestion's picture

Thou shall not withdraw any deposit/security.

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

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.

ekm's picture

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

banksterhater's picture

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

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!

smiler03's picture

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

ekm's picture

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

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

kridkrid's picture

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

stant's picture

mason jar federal biatchez. same intrest rate too

JLee2027's picture

Hoarding cash is a natural reaction to distrust of banks.

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).

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 ?

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'. 

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!

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.

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.

Free Markets's picture

Actually one of the best series I have ever read.

smiler03's picture

I am a Man I am Forty

Are you the reincarnated Robotrader?

Please say it is so!