EU Officials Admit Lagarde Was Right on EU Banks
Just a headline for now but Reuters is citing sources that EU officials are set to discuss how to recapitalize weak banks today. Just a week after fuming over Christine Lagarde's brutal honesty, it seems once again that the market has pushed the ignorant into action. It certainly didn't do anything to help Unicredit (which is halted now) and more broadly the performance of the short-sale-ban-list names of banks in France and Spain:
Chart courtesy of Bloomberg
From the recent Goldman Sachs 'State of the Markets', we remind that there is the potential for a EUR3.5tn to EUR5.5tn shortfall in long-term funding under Basel III (EUR1.8tn for the Top 16 banks alone) and EUR1tn shortfall in bank capital under Basel III across the EUR banking sector. And one last snippet - Germany ~33x and France ~25x have the largest asset leverage (compared to ~13x for the US).
<sarcasm>We look forward to the next stress test which will tell us unequivocally which banks are the weak ones </sarcasm>