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This Is What European Banks' Loan-To-Deposit Ratios Look Like

Tyler Durden's picture





 

For those who feel like spreading rumors about European deposit insurance, please do. But at least have some sense about what it would entail. European banks already have the highest loan-to-deposit loan-to-deposit ratio in the world. This means they are massively more levered, roughly 3x more, the US banks. In other words, deposit "encumbrance" is already absolutely maxed out. Think the ECB can credibly backstop Europe's €11 trillion deposit market, with Germany's agreement? Good luck.

And incidentally all of this was already previously discussed by Zero Hedge, precisely two months ago, when at the height of the market we made a very clear explanation why A Few Quick Reminders Why NOTHING Has Been Fixed In Europe. Among other things, we said:

Actually, there is one more thing. Deposits, or specifically, the Loan to Deposit Ratios of European banks. The chart [above] explains why not only is Europe's several asset constrained, it is also running out of funding, in the form of depositor cash: the most critical bank liability. Remember: without incremental deposits, banks can not invest in new assets, unless they generate cash from operations, and thus grow shareholder equity. There is a problem: as the final chart below shows, Europe, and especially Scandinavia which has consistently remained off the radar, is literally off the charts when it comes to LTD ratios.

 

With banks such as Danske, SHB, Swebank, DnB, and Nordea literally at 200% Loan-to-Deposits, but most other European banks too, even the tiniest outflow in deposit cash (ala what is happening in the PIIGS) will send the system into yet another liquidity spasm. Only this time, since what little unencumbered assets remaining have already been pledged to the ECB, there will be no quick LTRO collateral-type fix this time.

 

And judging by the market's reaction today, more muppets, pardon, people are starting to grasp this.

Alas, we were too quick to judge the muppets, which continue to fall for every BS rumor over and over.

 


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Wed, 05/23/2012 - 16:29 | Link to Comment Thomas
Thomas's picture

You guys worry too much. Buy some FaceBook, follow with a Netflix chaser, and then finish with a Greenmountain coffee.

Wed, 05/23/2012 - 16:31 | Link to Comment Thomas
Thomas's picture

BTW-Keep those Snorgtees ads. That latest is pretty amazing.

Wed, 05/23/2012 - 16:32 | Link to Comment Bunga Bunga
Bunga Bunga's picture

I want the Surfer Lady back!

Wed, 05/23/2012 - 17:00 | Link to Comment Rubbish
Rubbish's picture

Tyler likes the obese babes.

Wed, 05/23/2012 - 21:55 | Link to Comment neidermeyer
neidermeyer's picture

The new NISSEN ad is GREAT ,, an underwear ad with hot Japanese models... Whatever metrics got this ad on ZH needs to be bumped up.

Wed, 05/23/2012 - 17:10 | Link to Comment Freddie
Freddie's picture

+1

I mention Snorgtees ads so hopefully the Tyler's bots post those instead of the 2012 Kenyan and his Wookie 2012 banner ads.  I think they need more SnorgTee gals in t shirts and panties like the one chick.

Sat, 06/02/2012 - 23:43 | Link to Comment potlatch
potlatch's picture

establishedmen.com ftw

Wed, 05/23/2012 - 16:33 | Link to Comment jus_lite_reading
jus_lite_reading's picture

You forgot gulping down 500 large of LNKD floating turds at 700 P/E... In about 400 years, they payback what they made in the IPO if they don't dilute the stock anymore... as Schoenberger says, SCREAMING BUY!"

LMAO!!

Wed, 05/23/2012 - 17:06 | Link to Comment bdc63
bdc63's picture

There you go again Tyler ... trying to ruin a perfectly good face-ripping 3:00pm rumor with facts.

Wed, 05/23/2012 - 18:23 | Link to Comment LeonardoFibonacci
LeonardoFibonacci's picture

FaceBook,  Netflix chaser, and  Greenmountain coffee,  I actually own all 3 stocks.  WTF are you saying, i won't make any money?  I was hoping on a 50% return just this week. lol

Wed, 05/23/2012 - 23:45 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

thanks for the belly laugh ... very funny!

Sat, 06/02/2012 - 23:44 | Link to Comment potlatch
potlatch's picture

I'm a fuckin whale when it comes to Tom's of Maine

Wed, 05/23/2012 - 16:30 | Link to Comment zonetraders
Wed, 05/23/2012 - 16:31 | Link to Comment Stackers
Stackers's picture

Ia it me or does the word China appear on the right side of that chart the most ......

Wed, 05/23/2012 - 16:31 | Link to Comment Joe The Plumber
Joe The Plumber's picture

That is the trouble with deposit insurance

You trade the frequent risk of minor bank runs and small time limited panics into a systemic risk of once in a hundred year total collapse

Forests need to burn every once and a while to keep the levels of combustible materials low. Otherwise you risk that catastrophic burn that destroys the entire ecosystem

Wed, 05/23/2012 - 16:54 | Link to Comment blunderdog
blunderdog's picture

Sure, blame deposit insurance.

Here's a better idea: blame the dumbasses who put their money in the banks in the first place. 

It's really all their fault.

Duh.

Wed, 05/23/2012 - 17:08 | Link to Comment Joe The Plumber
Joe The Plumber's picture

It is the classic problem of insurance when attempts are made to insure large numbers of relatively small risks ( such as individual banks in a banking system) but the individual risk units are not independent)

Auto insurance is a good example. There is little risk of all cars in the usa having a wreck at the same time. One group of wrecks does not form a cascade that causes all other vehicles in the usa to crash. Cars, ships, satellites, lives, and lost packages do not correlate closely with each other

Where individual units of a system rise or fall as a whole then insuring individual risk is unwise since no insurance scheme could ever bail out the entire system

Wed, 05/23/2012 - 17:24 | Link to Comment Tirpitz
Tirpitz's picture

State insurance can -- we saw that in 2008, when the most reckless criminals the world ever has seen got free insurance from their henchmen running the government.

Wed, 05/23/2012 - 17:28 | Link to Comment blunderdog
blunderdog's picture

None of this is accidental, though.  This was all done intentionally.

Perhaps you can insure against ACCIDENT--like some bank makes a bad loan and ends up overextended.  You can't insure against institutional fraud--banks making hundreds of thousands of KNOWN-BAD loans because they knew they could sell them off before they failed.

Deposit insurance didn't have anything to do with any of this. 

I dunno, there's nothing to argue about here, you're just making crazy shit up.

Wed, 05/23/2012 - 17:59 | Link to Comment LeBalance
LeBalance's picture

parties of thieves require necktie parties.

but I don't see no one throwing no necktie parties.

Wed, 05/23/2012 - 18:20 | Link to Comment blunderdog
blunderdog's picture

Delusions of "justice" aside, hanging people doesn't even help.  It just shifts the stolen money to their kids, some of whom have never done anything wrong.

Wed, 05/23/2012 - 19:23 | Link to Comment UP Forester
UP Forester's picture

Kinda discourages future bad behavior, doncha tink?

Wed, 05/23/2012 - 20:18 | Link to Comment blunderdog
blunderdog's picture

Without sharing my personal take on whether it's a good idea, capital punishment does not appear effective as a deterrent, no.

Since you ask.

It has to do with the human survival psychology.  When a payoff is great enough, threat of future death is too heavily discounted to interfere with behavior.  Very robust finding in the data.

Wed, 05/23/2012 - 17:08 | Link to Comment PhilB
PhilB's picture

Given that Europe had been following US lead since Draghi came into the ECB, I actually think the rumors make sense. The US raised deposit insurance 2.5 times! to 250k USD. Seems Europe is in desperate need of a pan-european deposit insurance. Also, it wouldnt need to cover all 11Trillion of Deposits. It would be geared to the small bank accounts, stopping the plebs from fleeing in panic and rioting. Rumor or not, this would be the equivalent of LTRO3.

Wed, 05/23/2012 - 17:26 | Link to Comment Tirpitz
Tirpitz's picture

Unconfirmed rumor has it they are already talking to AIG's London branch.

Wed, 05/23/2012 - 16:40 | Link to Comment Marco
Marco's picture

Just eyeballing it the average for European banks in that graph is about 135 and for US banks about 90 ... where exactly did that 3x come from?

The difference between 135 and 90 is a shit ton of QE and excess reserves ... the EU is just not as far along on that roller coaster ride as the US (and yes, Germany is the main reason for that).

Wed, 05/23/2012 - 17:11 | Link to Comment Kayman
Kayman's picture

Let's see... excess reserves/Federal Reserve/off the reserve. Where is wealth being generated again ?

Oh, yeah. FacePlant.

Wed, 05/23/2012 - 16:43 | Link to Comment Day_Of_The_Tentacle
Day_Of_The_Tentacle's picture

Sorry if this is a stupid question, but is the loan-to-deposit ratio meaningful as a stand alone measure, if you don't know the size of the banks equity at the same time?

Edit: No matter. Tylers update answered my question.

Wed, 05/23/2012 - 16:37 | Link to Comment Itch
Itch's picture

I'm sure it would go down well with the "electorate".

Wed, 05/23/2012 - 16:37 | Link to Comment Rathmullan
Rathmullan's picture

And here it comes:

Monti, Hollande Favor Euro-Zone Bonds As Possible Solution, Says Dow Jones-WSJ Source

I think the U.S. should join the euro zone. Why shouldn't we be denied Merkel's tits.

Wed, 05/23/2012 - 16:41 | Link to Comment Rathmullan
Rathmullan's picture

Oops, dand double negatives. I meant "why should we be denied Merkel's tits".

Wed, 05/23/2012 - 16:49 | Link to Comment Marco
Marco's picture

US gets on everyone's tits ... when you try weaning it it starts throwing tantrums.

Wed, 05/23/2012 - 17:11 | Link to Comment Joe The Plumber
Joe The Plumber's picture

This american loves tits and can never get enough. I guess you are right

Wed, 05/23/2012 - 17:16 | Link to Comment Kayman
Kayman's picture

 Monti and Hollande favor unlimited credit at Deutsche Liebefraumilche.  Frau Merkel says Cash, no more credit.

Wed, 05/23/2012 - 17:49 | Link to Comment covert
covert's picture

this is be a big bailout!

 

http://expose2.wordpress.com

 

 

Sat, 06/02/2012 - 23:47 | Link to Comment potlatch
potlatch's picture

sold

Wed, 05/23/2012 - 16:43 | Link to Comment midgetrannyporn
midgetrannyporn's picture

Just pretend it never happened.

Pretend what never happened?

;)

 

Wed, 05/23/2012 - 16:55 | Link to Comment azzhatter
azzhatter's picture

that's what Timmy does

Sat, 06/02/2012 - 23:50 | Link to Comment potlatch
potlatch's picture

“Four! Five! Four! Anything you like. Only stop it, stop the pain!”

Wed, 05/23/2012 - 16:44 | Link to Comment Comay Mierda
Comay Mierda's picture

Thats a pretty tall house of cards

Wed, 05/23/2012 - 16:46 | Link to Comment marketcycles79
marketcycles79's picture

Nice clear road map by a trader a respect using cycles and patterns to map out these markets. http://humblestudent777.blogspot.com/

Wed, 05/23/2012 - 16:51 | Link to Comment Conman
Conman's picture

Who cares, just BTFD, it don't matter. Give up and drink the Kool aid. I'm cashing in my bonds to buy me some well .. anything because its all going up right?

Wed, 05/23/2012 - 16:53 | Link to Comment Catullus
Catullus's picture

Sweden has no reserve ratio requirement.

Loan to deposit ratios understate the reality of the liquidity situation. Deposit to Liquid Cash ratio is really the thing to look at when people are pulling deposits. It's great that your haven't loaned the deposits out, but what did you do with the cash instead? Buy treasury bonds (and not call it a loan to the government)?

Wed, 05/23/2012 - 17:18 | Link to Comment Joe The Plumber
Joe The Plumber's picture

Reserve requirements in a fiat currency system with an infinite repo backstop is an anachronism. The lender of last resort can monetize anything and everything

It would be an odd world indeed if depositors pulled out every bit of cash in the system but it is possible

Wed, 05/23/2012 - 16:54 | Link to Comment falak pema
falak pema's picture

loan to deposit sharks, all you need is to throw them a leg and they'll go berserk. WHose leg should we throw them to see the mayhem go from red to purple? Maybe a leg of Greek left guy; if he ever makes it to the top of the heap in June, you can see these banks going yellow around the gills. Melon yellow, like lemon green and Limewire blues. 

Wed, 05/23/2012 - 16:54 | Link to Comment Hobbleknee
Hobbleknee's picture

I cut through the lobby of Swedbank daily.  It looks like the unemployment office in there.

Wed, 05/23/2012 - 17:29 | Link to Comment ThirdWorldDude
ThirdWorldDude's picture

Some of the local branches have even pulled the plug on dealing with paper money... instead you've got deposit + withdrawal ATM's, and for all other purposes you get instructed to use the internet bank or call their operators.

 

Heck, soon their offices will look like the Greek MoF.

Wed, 05/23/2012 - 18:01 | Link to Comment LeBalance
LeBalance's picture

Banzai should put a diving board on that pic and call it MoF Diving.

Wed, 05/23/2012 - 16:55 | Link to Comment azzhatter
azzhatter's picture

but....but.... they're going to sign a "growth" compact as opposed to the "non-growth" compact in place now.

 

All is well

Wed, 05/23/2012 - 16:58 | Link to Comment IrishSamurai
IrishSamurai's picture

Can't believe that Tyler hasn't made a post about the Bernank leaving his calling card ...

 

http://www.google.com/finance?q=INDEXDJX:.DJI

 

Or maybe it was Sack ... either way ... the DEVIL is in the details.

 

Wed, 05/23/2012 - 17:23 | Link to Comment Kayman
Kayman's picture

IrishSamurai

What ?  You not see free market functioning ? 

Sat, 06/02/2012 - 23:53 | Link to Comment potlatch
potlatch's picture

Sir, I see trees of green, sir, red roses too, sir!

Wed, 05/23/2012 - 16:58 | Link to Comment Madcow
Madcow's picture

deflation -> contraction -> bank runs -> rumors and lies -> deflation -> contraction -> bank runs -> rumors and lies ...

 

 

Wed, 05/23/2012 - 17:01 | Link to Comment Hobbleknee
Hobbleknee's picture

The average mortgage term in Sweden is 200 years.  A lot of people have infinity mortgages, where they just pay interest and never pay down the principal.

Wed, 05/23/2012 - 17:14 | Link to Comment Freddie
Freddie's picture

It is called rent - pretty much.  In the USA - even if you pay your house off - you are a slave to the govt union workers who work for the county.  You are paying for their golden pension and you get a golden shower.

Wed, 05/23/2012 - 17:19 | Link to Comment Hobbleknee
Hobbleknee's picture

Well, Swedes get to pay "rent" (property taxes) too.

Sat, 06/02/2012 - 23:54 | Link to Comment potlatch
potlatch's picture

So *that's* the weak link!   I was wondering what was causing this glitch.  thnx bro

Thu, 05/24/2012 - 02:18 | Link to Comment superflyguy
superflyguy's picture

[Middle English morgage, from Old French : mort, dead (from Vulgar Latin *mortus, from Latin mortuus, past participle of mor, to die; see mer- in Indo-European roots) + gage, pledge (of Germanic origin).]

Wed, 05/23/2012 - 17:01 | Link to Comment HarryM
HarryM's picture

Bottom line , take what ever amount of time you expect for the market to crash and mutiply it by 10

Wed, 05/23/2012 - 17:11 | Link to Comment Impotent_Smurf
Impotent_Smurf's picture

.

Wed, 05/23/2012 - 17:10 | Link to Comment Impotent_Smurf
Impotent_Smurf's picture

You're probably right about a crash happening later rather than sooner. What a drag.

Wed, 05/23/2012 - 17:13 | Link to Comment Global Hunter
Global Hunter's picture

OK I can use that lets see: 14 months ago multiplied by 10 equals...hey what the fuck?

Sat, 06/02/2012 - 23:55 | Link to Comment potlatch
potlatch's picture

exactly

Wed, 05/23/2012 - 17:18 | Link to Comment Tirpitz
Tirpitz's picture

Only this time, since what little unencumbered assets remaining have already been pledged to the ECB, there will be no quick LTRO collateral-type fix this time.

You can trust the banksters to find a way to print collaterable assets. They won't let the system crash due to lack of money, so it'll be unlimited liquidity flooding the systemic relevant rats, balanced by tight austerity for the working class.

Wed, 05/23/2012 - 17:21 | Link to Comment Joe The Plumber
Joe The Plumber's picture

Lol thats how u keep inflation in check

Wed, 05/23/2012 - 17:54 | Link to Comment NotApplicable
NotApplicable's picture

When it comes down to "us vs. them" the inevitable inflation will not even be a consideration.

Instead it will be another "Give us $700B* or the market gets it!"

 

*though likely a much larger random number this time

Wed, 05/23/2012 - 17:36 | Link to Comment reload
reload's picture

BBC Newa finaly giving some airtime to the class action being brought againt UK Banks for miss selling Interest rate swaps to small businesses with mortgages. Speculation that the compensation bill will top £10bln, judging by the coverage its not going to be an easy brief acting as defence council. The banks here dont quite own the treasury select commmittee or judiciary to the extent apparent in the US, they will seek to settle out of court (without admital of wrong doing) but it will be a big bill. The bigger the better.        

Wed, 05/23/2012 - 17:55 | Link to Comment NotApplicable
NotApplicable's picture

They running out of back-office Indians to throw under the bus?

Strange days, indeed.

Sun, 06/03/2012 - 00:00 | Link to Comment potlatch
potlatch's picture

I am a strong supporter of outsourcing responsibility.  It is efficient, and the bonus is, it allows our neighboring countries to boot-up their own prison-industrial complex.  It's our best hope for a new Marshall Plan: export the prison state.

 

The state need not have anything to do with anything.  We could just all agree, say, that this is the fault of Paraguay, and we expropriate the assets and turn the citizens into a global gulag.  It could be quite pleasant.  Uruguay could provide staffing.

Sun, 06/03/2012 - 00:03 | Link to Comment potlatch
potlatch's picture

If we all stick to this story, I think we are golden

 

Wed, 05/23/2012 - 17:54 | Link to Comment lolmao500
lolmao500's picture

Loan to deposit? Hell most of them have only 1% or less in cash available. Any 2-3% total money run on a bank will crash it. Europe, US or almost anywhere in the world. They don't even have the supposed 10% cash on hand like they are supposed to.

Wed, 05/23/2012 - 17:58 | Link to Comment NotApplicable
NotApplicable's picture

10%? LOL

That number is sooooooo 20th Century.

Dunno what ECB rules are, but Benron's Rule is nowhere near that mark.

http://www.federalreserve.gov/monetarypolicy/reservereq.htm

Wed, 05/23/2012 - 18:17 | Link to Comment FreeMktFisherMN
FreeMktFisherMN's picture

If I wanted to 'leverage up' with one or two bearish stocks/ETFs between now and mid June, what would be the best options? What stocks in the Vix group would be most suitable? FAZ is probably something I'll strongly consider. Also will be looking into mining stocks and some PSLV if it finds some sort of bottom after this plunge. Would the VXX be appropriate? And it's just buy and hold-no options.

 

Between now and mid June is the focus but I guess I'd also say I'd expect some volatility thru summer and into the fall with the debt ceiling. Any thoughts appreciated, and I'm very conservative minded so no worries; I'm just looking for some strategies.

Wed, 05/23/2012 - 19:22 | Link to Comment Jolly.Roger
Jolly.Roger's picture

Is SHB (the second worst bank on the graph) Svenska Handelsbaken?

 

Bloomberg said Svenska Handelsbakenwas one of the safest banks in the world?

http://www.businessinsider.com/bloomberg-the-worlds-20-strongest-banks-2...

 

Anyone got a clear explanation of the reality?

I am an ordinary investor trying not to get burned. 

Wed, 05/23/2012 - 19:34 | Link to Comment Hannibal
Hannibal's picture

Oh,..wow, the little people still have "money" in the bank?

Wed, 05/23/2012 - 20:20 | Link to Comment blunderdog
blunderdog's picture

Still?

No.  The "little people" never did.

Thu, 05/24/2012 - 07:30 | Link to Comment Jolly.Roger
Jolly.Roger's picture

-

Wed, 05/23/2012 - 20:49 | Link to Comment chump666
chump666's picture

Another pitiful short squeeze outta Asia again.

QE3 will be HUGE USD swaps to the ECB.  That will be it.

Market is still short. CBs will lose control rates, Asian outflows continue, Europe is a necrotized zombie, American has absolute financial corruption etc etc etc

 

Wed, 05/23/2012 - 20:58 | Link to Comment Roandavid
Roandavid's picture

Anybody know or have a link regarding where the Canadian banks would reside on this list?

Other than ..... you know ..... in Canada.

Wed, 05/23/2012 - 22:48 | Link to Comment Mudja
Mudja's picture

Nice to see Lloyds TSB and Santander up there at 140% LDR. As Lloyds is 42% owned by the UK government, expect more money printing!!!

Thu, 05/24/2012 - 02:42 | Link to Comment hooligan2009
hooligan2009's picture

think the chart is missing something jsut as junk like, that is, it excludes government debt since that is not treated as a loan? you might have to redraw the left hand axis up another 30% or so.PLUS, there are derivatives, hence no counterpary risk of leninding by banks to other banks, since these are probably not loans either, nor are investments in non-Government bonds? do "loans" mean secured financing to companies or unsecured financing to ummm..monkeys?..and what kind of numbers have BNY and NT loans to deposits at 30-40%??? looks like incomplete analysis and hence gibberish to me.  

Thu, 05/24/2012 - 05:48 | Link to Comment andrewp111
andrewp111's picture

The power to print is unlimited. The ECB can simply conujure up 11 trillion Euros with a click of a mouse.

Sun, 06/03/2012 - 00:05 | Link to Comment potlatch
potlatch's picture

sold

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