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Euro Bank Run Shifts To Insurance Companies As Lloyd's Of London Pulls Cash From European Banks

Tyler Durden's picture


First it was US money markets; then it was various European industrial concerns (which somehow double down as banks); then it was China; now the bank runs shift to insurance institutions when, as Bloomberg reports, Lloyd's of London has decided to pull peripheral Euro bank deposits. What next: complete collapse of European interbank market as bank runs become a daily thing at both the retail and institutional level? Well, we already anticipated that. But it is something totally different to see it happen in practice.

From Bloomberg: "Lloyd’s of London, concerned European governments may be unable to support lenders in a worsening debt crisis, has pulled deposits in some peripheral economies as the European Central Bank provided dollars to one euro-area institution. "“There are a lot of banks who, because of the uncertainty around Europe, the market has stopped using to place deposits with,” Luke Savage, finance director of the world’s oldest insurance market, said today in a phone interview. “If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them.” Lloyd’s, which holds about a third of its 2.5 billion pounds ($3.9 billion) of central assets in cash, has stopped depositing money with some banks in Europe’s peripheral economies, Savage said, declining to name the countries or institutions. “We have a very conservatively positioned balance sheet,” Savage said. Lloyd’s also holds about a third of its assets in mainly U.S. and U.K. government bonds and a third in corporate bonds, he said." As usual, the biggest threat for European banks are not short sellers, not even naked CDS traders: it is precisely this - a deposit run, which saps the liquidity lifeblood out of any bank, hence making its collapse a matter of time.


Lloyd’s, founded in a London coffee house in 1688, swung to a 697 million-pound pretax loss in the six months to June 30 after the most expensive first half for natural disasters on record. The market made a profit of 628 million pounds in the same period a year earlier, the London-based market said in a statement today.


“These are tough times for the insurance industry, but we are well positioned to handle them,” Chief Executive Officer Richard Ward said in the statement. “While interest rates are low and equity markets are volatile, we can’t rely on investment income to subsidize our underwriting. We must decline under- priced risks.”


Insurers’ profits have been hurt by natural catastrophes, including the earthquake and tsunami that struck Japan in March, causing record insured losses of $70 billion in the first half of the year, according to broker Guy Carpenter & Co. At the same time, record low interest rates are crimping investment returns.


The insurance markets made 548 million pounds on its investments in the period, 8.2 percent lower than in the first half of 2010 as interest rates in the U.K., U.S. and the euro zone neared record lows.


“I cannot see any reasonable prospect of making decent investment income in the medium term,” Savage said.


Lloyd’s had a combined ratio of 113.3 percent in the first half, meaning for every pound it took in premiums, it paid out 1.13 pounds in claims. That worsened from 98.7 percent in the first half of 2010.

Look for a flurry of refutations from Europe which seeks to damage control this latest fact as rumor and innuendo.


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Wed, 09/21/2011 - 08:10 | 1691708 Fips_OnTheSpot
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Wed, 09/21/2011 - 08:14 | 1691725 oobrien
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I'm fucking crash-weary.

When is this shit actually gonna happen?

Anybody have a date.

Celente says October.

Wed, 09/21/2011 - 08:37 | 1691809 UGrev
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Wed, 09/21/2011 - 08:43 | 1691829 falak pema
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roller coasters are recurrent travellers along the same rails. So we have the feeling we've been there before. It goes on and on, until it stops. Enjoy the ride and hang on to your cool, its only fiat. 

Wed, 09/21/2011 - 08:38 | 1691816 LongSoupLine
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The "crash" in itself is a series of events that plays out over a period of time (weeks, months).  You are witnessing the start of the "impact".

Wed, 09/21/2011 - 09:13 | 1691919 Raynja
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The crash seems so fast in the rearview and incredibly slow when youre barreling out of control towards disaster.

Wed, 09/21/2011 - 09:04 | 1691892 knukles
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Oh come on, we gotta have somethin' to piss and moan about.  Keeps the animal spirits contained, inside their homes, women and children are safe, samll creatures don't need to be locked up and when we get bored we can watch old Jersey Shore or Weather Channel reruns. 

And so far nobody's gotten a DWI (Drunk While on the Internet).

Wed, 09/21/2011 - 08:10 | 1691710 GetZeeGold
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It's a bank run marathon.

Wed, 09/21/2011 - 09:01 | 1691883 Yamaha
Yamaha's picture

And the question remains - when will they stop paying out?

Wed, 09/21/2011 - 08:12 | 1691712 GeneMarchbanks
GeneMarchbanks's picture

It's on like Donkey Kong!

Bring it back Tyler...

Wed, 09/21/2011 - 11:11 | 1692450 Hephasteus
Hephasteus's picture

Crank dat donkey kong!!

Watch me donkey kong dat ho. What me donkey kong dat ho.

Wed, 09/21/2011 - 08:11 | 1691714 doomandbloom
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Remain Calm!

Wed, 09/21/2011 - 08:15 | 1691728 GetZeeGold
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All is well........



Wed, 09/21/2011 - 08:13 | 1691720 ZeroPower
ZeroPower's picture

Anyone seen the main Lloyd's HQ in the City? the say the least.

Wed, 09/21/2011 - 08:14 | 1691722 CitizenPete
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Run, do not walk to the nearest exit.  Half a dozen people just jumped up in the movie theater, screamed and ran for the exit.  How do you like the film?

Wed, 09/21/2011 - 08:16 | 1691737 GeneMarchbanks
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Hollywood ending.

Wed, 09/21/2011 - 09:11 | 1691907 Smiddywesson
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Wed, 09/21/2011 - 08:14 | 1691723 trampstamp
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It's a coordinated effort to scare the sheeple and at the same time make off like a bandit on the VIX option expiration first print today. Jackasses!

Wed, 09/21/2011 - 08:14 | 1691724 westboundnup
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Is France a peripheral EU country?

Wed, 09/21/2011 - 08:18 | 1691747 GetZeeGold
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They all seem to be transitory countries.


Wed, 09/21/2011 - 08:15 | 1691729 HedgeFun
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Can't they just buy an insurance policy against bank failure??

Wed, 09/21/2011 - 08:15 | 1691731 Fips_OnTheSpot
Fips_OnTheSpot's picture

Nice - Gold just dropped 10USD on that one.. Them algos are mad?

Wed, 09/21/2011 - 08:18 | 1691746 AngryGerman
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China is pushing paper prices down so they can buy the physical.


The question is just? Where is the physical?

Wed, 09/21/2011 - 08:20 | 1691755 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

It's at Fort Knox dummy.

Wed, 09/21/2011 - 08:21 | 1691762 AngryGerman
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riiiiiiiiiiiiiiiiiight, i forgot..... that's located in Wonderland, isn't it? Guarded by the mad Hat Maker!

Wed, 09/21/2011 - 08:21 | 1691760 GetZeeGold
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Bloomberg just ran an article stating all the vaults are buying physical is out of the can't make this sh!t up.


Wed, 09/21/2011 - 09:19 | 1691937 Smiddywesson
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Many thanks AG, I'm glad I took the time to read that.

Wed, 09/21/2011 - 08:24 | 1691769 Fips_OnTheSpot
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On a ship sailing to Venezuela! ;-)

Wed, 09/21/2011 - 08:49 | 1691841 DosZap
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The question is just? Where is the physical?

Headed to the Pac Rims, India, and China just as fast as they can  get it.

ObuhNero is diddling, while the real MONEY is all hot footing into Asia................

99.5% of the Sheeples are still holding buttwipe.

I am starting to see Prems go up in places where they had not ever, the shortages,and suppliers must be having issues.

(Some I expect it from, as they are greedy pricks anyway),but not the one's I have used.

Wed, 09/21/2011 - 09:24 | 1691955 Smiddywesson
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Working as intended AG. 

TPTB WANT gold in the hands of Asians and us to have no gold so that our living standards go down and theirs go up.  This will allow a more sustainable system when they hit tthe reset button. 

Wed, 09/21/2011 - 08:16 | 1691734 King_of_simpletons
King_of_simpletons's picture

Bullish. 200+ on the DOW.

Wed, 09/21/2011 - 08:16 | 1691735 Chuck Walla
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Its one thing to muse and consider such a thing, but watching it in slo-mo is just weird.

Wed, 09/21/2011 - 08:16 | 1691736 falak pema
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Oligarchs at war...anglosaxon vs Eurolandish.

Bottom line : is Fofoa right?

Wed, 09/21/2011 - 08:17 | 1691739 AngryGerman
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"peripheral economies": French included?

Wed, 09/21/2011 - 08:18 | 1691749 Fips_OnTheSpot
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They are sitting on an island - anything is "peripheral" for them, esp. Frogs.

Wed, 09/21/2011 - 08:25 | 1691775 Quintus
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Indeed.  As the old joke goes: "Heavy fog in the English Channel - Europe cut off."

Wed, 09/21/2011 - 08:18 | 1691745 misterc
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Jean-Claude will take care of this. Just hand him the keyboard and he will deposit some €€€ and $$$ at every bank in dire need for cash.

I'd even go as far as buying (unsecured) 6 to 12 month-bank bonds, if I was an institutional.

Wed, 09/21/2011 - 08:19 | 1691750 youngman
youngman's picture

Where are they running to with the cash...Swizerland????  Its not gold and silver...we need to watch wheelbarrow sales..see if they are skyrocketing..maybe they are just running home with all the cash and putting it under their beds...

Wed, 09/21/2011 - 08:20 | 1691756 AngryGerman
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it's a coffee company, so i guess they are back to buying coffee

Wed, 09/21/2011 - 08:20 | 1691757 Mentaliusanything
Wed, 09/21/2011 - 08:21 | 1691758 PMakoi
PMakoi's picture

Send U.S. yo' money!  We be pimpi'n, you ho's shut up now, and don't be bitch'n. 

Opium for the masses be here soon.  Idiocracy comin'.

Wed, 09/21/2011 - 08:23 | 1691759 fdisk
fdisk's picture

GOLD same time same sh*t. Dropping like a rock.

20$+ drop in 1 hour. Nice work, bastards.

Wed, 09/21/2011 - 08:29 | 1691790 GeneMarchbanks
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Relax and BTFD.

Wed, 09/21/2011 - 08:23 | 1691766 msmith
msmith's picture
Looks like the EURUSD has decided to makes its move lower.  A bearish trend channel has been formed with downside price action This should impact equities negatively as well.
Wed, 09/21/2011 - 08:30 | 1691793 trampstamp
trampstamp's picture

technicals will not matter today. Big money will take advantage of volatility.

Wed, 09/21/2011 - 08:38 | 1691818 ZeroPoint
ZeroPoint's picture

Why haven't the plebs caught on yet and emptied their accounts?

Wed, 09/21/2011 - 08:54 | 1691868 buzzsaw99
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last time i checked fidelity wasn't worried.

Wed, 09/21/2011 - 08:56 | 1691872 Jean
Jean's picture

If a list of which banks Lloyds pulled out of were to leak, I think the plebes would start running.

Wed, 09/21/2011 - 09:05 | 1691893 Georgesblog
Georgesblog's picture

This is suspicious, all by itself. It's been so quiet about the story on the gold found to be adulterated with tungsten story, that I have to wonder what kind of dirty back room deal is working behind the scenes. So many banks are vulnerable and Lloyd's was reportedly the underwriter on gold deposits in Canada and England. "The Four Money Questions" tell me that this is being swept under the rug because somebody stole for the "right" people.

Wed, 09/21/2011 - 09:16 | 1691918 knukles
knukles's picture

This makes ultimate sense.

See, yesterday or the day before, Seimens pulled their money out of commercial banks and parked it with the ECB directly.  Yes, that was reported.  With the ECB.
OK, so the bank is short a deposit and has to borrow it somewhere else, right?
So they go to the ECB who now has excess funds (from Seimens) to lend.
So ECB parks its cash with the bank that Seimens pulled it out of.
Recycling complete.
Neither of which have any meaningful capital whatsoever.
And not like the ECB's balance sheet isn't got loads of unrepentantly toxic bad shit paper all over it either....

Like the dying munching the cooch of the dead.  
Fucking marvelous!

This gonna be one motherfucking Filght To Quality when it happsens.

How negative can treasury yields get?

The Rabbit Hole's Mighty Deep, Alice ©

Wed, 09/21/2011 - 09:29 | 1691972 Peter K
Peter K's picture

Just goes to show you that words sometimes aren't enought. Driving the final nail in the coffin of the literary structuralists :)

Thu, 05/17/2012 - 02:45 | 2434296 ChrisChin
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The banks which are surviving under the onslaught of the economic crisis are becoming smart and starting to realize the need for some form of insurance for their funds, and in turn are causing the other banks to be sapped dry of liquidity.

Chris -

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