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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 | 2456479 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 | 2456495 Thomas
Thomas's picture

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

Wed, 05/23/2012 - 16:32 | 2456503 Bunga Bunga
Bunga Bunga's picture

I want the Surfer Lady back!

Wed, 05/23/2012 - 17:00 | 2456591 Rubbish
Rubbish's picture

Tyler likes the obese babes.

Wed, 05/23/2012 - 21:55 | 2457450 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 | 2456618 Freddie
Freddie's picture


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 | 2488415 potlatch
potlatch's picture ftw

Wed, 05/23/2012 - 16:33 | 2456507 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!"


Wed, 05/23/2012 - 17:06 | 2456547 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 | 2456853 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 | 2457757 ReactionToClose...
ReactionToClosedMinds's picture

thanks for the belly laugh ... very funny!

Sat, 06/02/2012 - 23:44 | 2488416 potlatch
potlatch's picture

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

Wed, 05/23/2012 - 16:30 | 2456493 zonetraders
Wed, 05/23/2012 - 16:31 | 2456494 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 | 2456498 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 | 2456575 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.


Wed, 05/23/2012 - 17:08 | 2456610 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 | 2456672 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 | 2456681 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 | 2456787 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 | 2456851 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 | 2457017 UP Forester
UP Forester's picture

Kinda discourages future bad behavior, doncha tink?

Wed, 05/23/2012 - 20:18 | 2457158 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 | 2456611 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 | 2456677 Tirpitz
Tirpitz's picture

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

Wed, 05/23/2012 - 16:40 | 2456513 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 | 2456625 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 | 2456515 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 | 2456520 Itch
Itch's picture

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

Wed, 05/23/2012 - 16:37 | 2456521 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 | 2456532 Rathmullan
Rathmullan's picture

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

Wed, 05/23/2012 - 16:49 | 2456558 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 | 2456627 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 | 2456642 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 | 2456756 covert
covert's picture

this is be a big bailout!



Sat, 06/02/2012 - 23:47 | 2488420 potlatch
potlatch's picture


Wed, 05/23/2012 - 16:43 | 2456541 midgetrannyporn
midgetrannyporn's picture

Just pretend it never happened.

Pretend what never happened?



Wed, 05/23/2012 - 16:55 | 2456582 azzhatter
azzhatter's picture

that's what Timmy does

Sat, 06/02/2012 - 23:50 | 2488424 potlatch
potlatch's picture

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

Wed, 05/23/2012 - 16:44 | 2456542 Comay Mierda
Comay Mierda's picture

Thats a pretty tall house of cards

Wed, 05/23/2012 - 16:46 | 2456548 marketcycles79
marketcycles79's picture

Nice clear road map by a trader a respect using cycles and patterns to map out these markets.

Wed, 05/23/2012 - 16:51 | 2456566 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 | 2456571 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 | 2456648 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 | 2456572 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 | 2456574 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 | 2456689 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 | 2456796 LeBalance
LeBalance's picture

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

Wed, 05/23/2012 - 16:55 | 2456577 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 | 2456585 IrishSamurai
IrishSamurai's picture

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


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


Wed, 05/23/2012 - 17:23 | 2456669 Kayman
Kayman's picture


What ?  You not see free market functioning ? 

Sat, 06/02/2012 - 23:53 | 2488431 potlatch
potlatch's picture

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

Wed, 05/23/2012 - 16:58 | 2456588 Madcow
Madcow's picture

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



Wed, 05/23/2012 - 17:01 | 2456593 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 | 2456639 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 | 2456650 Hobbleknee
Hobbleknee's picture

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

Sat, 06/02/2012 - 23:54 | 2488432 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 | 2458030 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 | 2456597 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 | 2456620 Impotent_Smurf
Impotent_Smurf's picture


Wed, 05/23/2012 - 17:10 | 2456621 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 | 2456635 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 | 2488433 potlatch
potlatch's picture


Wed, 05/23/2012 - 17:18 | 2456647 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 | 2456659 Joe The Plumber
Joe The Plumber's picture

Lol thats how u keep inflation in check

Wed, 05/23/2012 - 17:54 | 2456768 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 | 2456713 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 | 2456778 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 | 2488436 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 | 2488441 potlatch
potlatch's picture

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


Wed, 05/23/2012 - 17:54 | 2456769 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 | 2456785 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.

Wed, 05/23/2012 - 18:17 | 2456843 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 | 2457014 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?


Anyone got a clear explanation of the reality?

I am an ordinary investor trying not to get burned. 

Wed, 05/23/2012 - 19:34 | 2457047 Hannibal
Hannibal's picture

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

Wed, 05/23/2012 - 20:20 | 2457162 blunderdog
blunderdog's picture


No.  The "little people" never did.

Thu, 05/24/2012 - 07:30 | 2458290 Jolly.Roger
Jolly.Roger's picture


Wed, 05/23/2012 - 20:49 | 2457234 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 | 2457254 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 | 2457591 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 | 2458051 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 | 2458197 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 | 2488444 potlatch
potlatch's picture


Do NOT follow this link or you will be banned from the site!