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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Kayman's picture


What ?  You not see free market functioning ? 

potlatch's picture

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

Madcow's picture

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



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.

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.

Hobbleknee's picture

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

potlatch's picture

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

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).]

HarryM's picture

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

Impotent_Smurf's picture

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

Global Hunter's picture

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

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.

Joe The Plumber's picture

Lol thats how u keep inflation in check

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

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.

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.

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.

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. 

Hannibal's picture

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

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


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.

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!!!

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.  

andrewp111's picture

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