Frontrunning: February 21

• Spiegel: Stop the 130-billion bank transfer! (Spiegel)
• Greece Wins Bailout as Europe Chooses Aid Over Default (Bloomberg)
• Greek pro-bailout parties at all-time low, poll shows (Reuters)
• Eurozone agrees €130bn Greek bail-out (FT)
• Top Banks in EU Rush for Safety (WSJ)
• Medvedev Adviser Says Kudrin Would Be Better Prime Minister (Bloomberg)
• US and Mexico in landmark oil deal (FT)
• McCain calls for US to support Syria rebels (FT)
• Coal Shipments to India Overtaking China on Fuel Shortage (Bloomberg)
• Gillard Shrugs Off Ousting Threat (WSJ)

Overnight Media Summary:

WSJ

* Eurozone finance ministers agreed on a long-awaited accord to secure a new 130 billion euros ($171.9 billion) bailout and debt-restructuring deal for Greece, after haggling into the early hours of Tuesday morning to settle the final details.

* Alexander Rekeda, who led Japanese bank Mizuho Financial Group's charge into the then-red-hot business of U.S. subprime debt in 2006, was warned by the Securities and Exchange Commission (SEC) in October that he faces the potential charges.

* Samsung Electronics plans to spin off its liquid-crystal display operations into a separate company in an effort to revive its unprofitable flat-panel business.

* Wal-Mart Stores Inc said it plans to buy a majority stake in Chinese e-commerce company Yihaodian, a move to boost its online efforts as consumers there flock to the Internet to shop.

* Ford Motor Co expects China's vehicle sales to rise "about 5 percent" in 2012, the auto maker's regional head said, forecasting a second year of relatively moderate growth for the world's largest car market after years of double-digit surges.

FT

LLOYDS RIVALS' EXECUTIVES TO KEEP BONUSES

Executives responsible for misselling loan insurance at Royal Bank of Scotland and Barclays look set to keep their past bonuses, ignoring the precedent set on Monday by Lloyds Banking Group. http://link.reuters.com/gex66s

TURKCELL'S OWNER TO FIND $1.4 BILLION OR LOSE CONTROL

The owner of Turkcell has to come up with $1.4 billion next month or lose its controlling stake in Turkey's biggest mobile group, at least for the duration of an appeal, a court has ruled. http://link.reuters.com/hex66s

APPLE MAKES LEGAL THREAT OVER IPAD DISPUTE

Apple levelled a new legal threat on Monday against the struggling electronics company that has claimed it owns the iPad name in China, as a court in southern China ordered a large retailer to stop sales of the gadget. http://link.reuters.com/jex66s

US CORPORATES SHY TO OFFER GUIDANCE

U.S. companies are more uncertain about the future than at any point since the financial crisis, with just one in five of the country's biggest corporations making any predictions as they published fourth-quarter results. http://link.reuters.com/kex66s

VISTA MAKES RIVAL BID FOR MISYS

A U.S. private equity group has made a rival 1.2 billion pound ($1.90 billion) offer for Misys, the banking software company which this month agreed a merger deal with Switzerland's Temenos. http://link.reuters.com/mex66s

DUBAI'S ABRAAJ BUYS AUREOS IN EMERGING MARKET PUSH

Aureos Capital, the private equity group spun out of the government-owned emerging markets investor CDC in controversial circumstances, is to be sold for an undisclosed price. http://link.reuters.com/nex66s

VEOLIA CHIEF FACES BOARDROOM COUP

Antoine Frerot, chief executive of Veolia, the world's biggest water utility by sales, is facing a boardroom coup orchestrated by his former mentor, Henri Proglio, the boss of EDF. http://link.reuters.com/pex66s

SANTANDER FINED OVER STRUCTURED PRODUCTS

Spanish bank Santander has been fined 1.5 million pounds by the UK financial regulator for selling 1.2 billion pounds of "guaranteed" stock market-linked bonds without making it clear to consumers that they would not be fully covered for compensation if the bank failed. http://link.reuters.com/qex66s

NYT

* Even as government officials prepare to unveil new standards this week for how banks treat millions of Americans facing foreclosure, housing advocates and homeowners are skeptical the rules will be able to do something past efforts have not -- provide a beleaguered borrower with one individual to help them navigate the mortgage maze.

* Greece finally secured its second giant bailout early Tuesday after eurozone finance ministers agreed to save it from bankruptcy in exchange for severe austerity measures and subject to strict conditions.

* The United States and Mexico reached an agreement on Monday on regulating oil and gas development along their maritime border in the Gulf of Mexico, ending years of negotiations and potentially opening more than a million acres to deepwater drilling.

* The Lloyds Banking Group, partly owned by the British government after receiving a bailout, on Monday became the first bank in Britain to cut past bonuses because of losses that turned up later.

* URS, a construction and engineering firm, said on Monday that it would acquire Flint Energy Services for $1.25 billion, in a bid to bolster its presence in North America's oil and gas industry.

European Economic Update:

• UK Public Finances (PSNCR)  -16.8B – higher than expected. Consensus -24.7B. Previous 22.9B. Revised 22.8B.
• PSNB ex Interventions -7.8B – lower than expected. Consensus -6.3B. Previous 13.7B. Revised 14.0B.
• UK Public Sector Net Borrowing -10.7B – lower than expected. Consensus -9.1B. Previous 10.8B. Revised 11.1B.
• Switzerland Trade Balance 1.55B – lower than expected. Consensus 2.50B. Previous 2.07B. Revised 2.01B.
• Switzerland Exports real SA -3.4% m/m. Previous 6.1% m/m. Revised 6.4% m/m.
• Switzerland Imports real SA 3.6% m/m. Previous 7.6% m/m. Revised 8.4% m/m.
• Switzerland Money Supply M3 8.2% y/y. Previous 7.7% y/y. Revised 7.4% y/y.
• Netherlands Consumer Confidence (sa) -36. Previous. -37.
• Netherlands House Price Index 0.6% m/m -3.3% y/y. Previous -0.9% m/m. -4.0% y/y.
• Finland Unemployment Rate 7.8%. Previous 7.4%.
• Denmark Consumer Confidence Indicator -4.8 – higher than expected. Consensus -7.5. Previous -7.0.
• Slovakia Unemployment Rate 13.7% - lower than expected. Consensus 14.0%. Previous 13.6.%.
• Hungary Average Gross Wages 10.1% y/y – higher than expected. Consensus 6.2% y/y. Previous 6.0% y/y. Revised 6.1% y/y.
• Croatia Consumer Prices -0.4% m/m 1.2% y/y. Previous -0.4% m/m 2.1% y/y.
• Croatia Unemployment Rate 19.8%. Previous 18.7%.

Comments

[cokegarcia]

awesome thx!

[reload]

Spiegel gets it, good for them but fat lot of good it will do. Journalist probably just got his name on a list.

[distopiandreamboy]

Greeks and EU have agreed to agree on agreeing in the future after Greek politicians agree on passing more austeriry and reforms. 

TL;DR: can has been kicked, nothing's changed

[dizzyfingers]

Regarding "Top Banks in EU Rush for Safety (WSJ)":

Top Banks in EU Rush for Safety (WSJ) Trust Your Instincts

The FDR Framework is the backbone for a 21st century financial system. Under this framework, governments ensure that every market participant has access to all the useful, relevant information in an appropriate, timely manner. Market participants have an incentive to analyze this data because they are responsible for all gains and losses. http://tyillc.blogspot.com/2012/02/big-banks-in-eu-rush-for-safety.html

Monday, February 20, 2012
Big banks in EU rush for safety The Wall Street Journal ran an article discussing how the largest banks in the Eurozone are depositing record amounts of funds with the global central banks. The article theorizes that this is being done for liquidity purposes.

Regular readers know this is not being done for liquidity purposes but rather because the interbank lending market is frozen.

The interbank lending market froze because none of these banks can evaluate the solvency of any of the other banks. In addition, each bank knows that it is hiding losses on and off its balance sheet, so it wonders just how big are the losses that the other banks are hiding.

Top European banks, responding to new regulations and wary of lending, are stashing increasingly large sums of money at central banks around the world in a collective flight to safety.

The eight giant European banks that have disclosed their annual results in recent weeks reported holding a total of about $816 billion in cash and deposits at central banks as of Dec. 31, according to calculations by The Wall Street Journal. That is up 50% from a year earlier, when the same banks were holding roughly $543 billion.

The stockpiling, which occurred over the course of last year, represented a collective response to the growing pressures on the European financial system.

By storing funds at central banks in Europe, the U.S. and elsewhere, banks ensure that their money is safe. And they appease nervous regulators who want to guarantee that banks will have easy access to funds in a pinch.

But the strategy has a downside. Banks are depositing money at central banks instead of lending it to individuals, businesses or governments, which has the potential to exacerbate a Europewide lending drought. In addition, central banks pay paltry interest rates on the deposits, squeezing bank profits.

Hard-hit French banks were at the vanguard of the trend. Last year, Société Générale SA more than tripled the amount of money it was placing at central banks world-wide, to €44 billion ($57.8 billion). BNP Paribas SA's central-bank deposits soared 74% to €58 billion. More than half of BNP's deposits are parked at the Federal Reserve, with the remainder at the European Central Bank, the Bank of Japan and other central banks.

"We have faced a huge crisis in the second half of last year. And so we reacted as fast as possible in order to be on the safe side," BNP Chief Executive Jean-Laurent Bonnafe said last week.

In addition to BNP and Société Générale, the six other banks included in the tally are Spain's Banco Santander SA andBanco Bilbao Vizcaya Argentaria SA; Switzerland's UBS AG and Credit Suisse Group AG; Germany's Deutsche Bank AG; and the U.K.'s Barclays PLC. Each reported holding more cash and central-bank deposits at the end of 2011 than a year earlier....

"It's a symptom of where the markets are right now and how people feel safer putting their money at central banks," said an official at a top Spanish bank....

Some European banks acted at the behest of individual regulators. Spain's Santander—which increased the amount it deposited at central banks to €97 billion at the end of December, up 58% from June 2010—said the rise was partly due to tougher liquidity rules in the U.K. and Brazil, where it has major operations....

It is unclear whether the deposit levels will remain elevated for the foreseeable future. Some bank executives say it is likely a long-term phenomenon as banks adapt to new regulations.

Others say banks might find better uses for the funds once market conditions improve.

"There is no need to keep such a huge buffer once things would stabilize and calm down," said BNP's Mr. Bonnafe. "So this is something we are going to manage in order to try and optimize between security and cost."

Posted by Richard at 5:26 PM     Labels: Cost of Opacity
2 comments:

Fungus FitzJuggler III said...

This always happens in a credit collapse!

The banks are all bust and now exist to destroy wealth for as long as they are allowed to. They cannot lend into a declining asset market, can they? So they take money and speculate on commodities, creating a bubble, recording paper profits, but eventually, this bubble too will collapse!

Scrap the banks and remove corporate limited liability from all such organizations!

February 20, 2012 10:08 PM

Richard said...

I don't think we should scrap the banks or remove corporate limited liability from banks.

The question that no one seems willing to ask is "how did the banks come to be such risky businesses when they are highly regulated?"

My answer is that regulators stopped doing their job over two decades ago when, led by Alan Greenspan, they bought into the concept that market discipline was more effective than regulation.

This might be true, but there is one condition that is necessary for market discipline to occur. This condition is that market participants have access to all the useful, relevant information in an appropriate, timely manner.

For banks, this is satisfied only with ultra transparency.

Clearly, ultra transparency does not exist today for all market participants. It only exists for regulators.

If regulators want banks to be subject to market discipline, they need to require banks provide ultra transparency.

February 21, 2012 7:22 AM