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What Oliver Wyman Really Said About Spain's Banks
The 'real' results from Oliver Wyman's stress tests are out, via Bloomberg, and there are some skeptical conclusions at best. The expected loss for Spanish banks under the adverse stress test scenario is €253-274 billion (and EUR 173-194 billion under the base-case). The announced capital deficit under the stress scenario of €51-62 billion assumes some rather interesting items:
- The expected loss is offset by €98 billion of exiting provisions (which will have to be offset by something and if deposit outflows continue, instead of reverse, then this merely accelerates the under-capitalization); and
- New profit generation of €64-68 billion seems remarkable for a banking system which is inextricably tied to its sovereign and entirely bust itself
- We won't even speculate how a broke banking system can have a €33-39 billion "excess capital buffer"
It seems clear that adjusting these for any sense of reality means the real loss (or capital deficit) will be well north of the EUR 100 billion assigned to the country. We only wonder if Oliver Wyman was paid, as they should be, in stock of Spanish bank STD, vesting over the next 3 years.
And just so the message is not lost, we repeaet it: the insolvent Spanish banking system is expected to generate up to €65 billion in profits! Yet according to MSCI, the market cap of the entire Spanish banking system is.... €91.82 billion.
You can't make this shit up... (thanks to the Supreme Court we can now swear)
the full report:
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as the dominoes continue to fall..
<--- Worldwide Debt Jubilee
<--- Total System Collapse
I don't see any other options at this point. Second could simply be inevitable at this point.
Late breaking news...
(Reuters) - Failing a successful euro zone bailout and the resultant complete capitulation of Portugal, Ireland, Greece, Spain and Italy, PIGSpIt nations will be asked to kindly transfer all sovereign assets to the ECB, to in turn be retransferred to the EBC (European Banking Cabal), and to kindly turn off the lights and exit the Euro.
Euro zone finance ministers met in Luxembourg to discuss how to create a new currency union for the delinquent nations.
"We have already started working on the design of the new bank notes with the Commission, the European Central Bank and the International Monetary Fund," Spanish Economy Minister Luis de Guindos told reporters as he arrived for the talks. "We will present the proofs of our new currency, the 'Peasanto' in the next few days."
"We will present the proofs of our new currency, the 'Peasanto' in the next few days."
Printed in 10 gazillion denomination notes for your convenience.
Will a clown picture be included on the new currency?
Herman Von Rompuy is very.... photogenic. I nominate this real-life 'Smeagol' to be the portrait on the new GooglePengo.
Nice fiction, I don't believe for a minute that if this did happen the countries would turn over their assets. They would say F you and go back to their respected currencies.
Glad there are no "stresses" one might consider "adverse" anywhere on the horizon. Phew!! Bullet dodged there!
Besides, in reality, the numbers so far have wound up far worse than the so-called "adverse" scenarios, if memory serves.
We'd be lucky if it was only that bad.
"New profit generation of EUR 64-68 billion seems remarkable for a banking segment so tied to its sovereign and entirely bust itself"
Easy. Buy Spanish Government bonds yielding 7% (sson 10%) and borrow the money from the ECB at 3% (soon 0%).
Yes, capital and resource mis-allocation and mal-investment at it's finest.
I think they borrow at 1%...
and lever by 10 times,easy money.
This is the standard formula for the theft of wealth from any nation with a central bank that uses US federal reserve notes/deposits as "reserves". Step out of this "club" and face the consequences. http://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man
We seem to be rapidly running out of offsets....be a good chap and check under those mattresses.
So these 62 bn were just nice headline.
Here one can find the two stress tests: http://www.bde.es/webbde/es/secciones/prensa/info_interes/reestructuracion.html
edit: stress tests are in English
Just remember boys....it's not a "real" loss unless you sell. So ya'll hold on to those sovereign notes/loans/bonds/rolls of pretty TP real tight.
Dollar cost averaging.....all the way to zero
"This ain't gonna hurt a bit. Promise." - Helicopter Ben
the BASIC point here is the estimate of 253- 274bn LOSS>>>>> O M G !!!
Anbd that number in turn is likely based on statistical default ratios (ASSUMPTIONS) which are "reasonable"
THE REAL FACT is the banks have WAY MORE LIABILITIES than ASSETS. And NO CAPITAL BASE To make up the difference.
This is an INSOLVENCY CRISIS NOT a LIQUIDITY crisis, NOT a EURO CRISIS.
All the rest are assumptions.
Habing worked around and with these types of consultants and done similar modelling myself, the choice of assumptions become HIGHLY POLITICAL, its a trade-off between Reputation for independence and client "needs"... OW don't want to go down in history as the guys that collapsed the Spanish economy with faulty assumptions that later proved unlikely to hold but became self fulfilling prophecies...
Even this report is a case of "how long is a piece of string" dressed up in intellectual business speak for a basic fact: the Banking system unlike all other businesses, MULTIPLE TIMES OVER counts each others' LOANS as their OWN ASSETS: that is the nature of the FRB system.
So the ONLY way to say "THERE ISNT ENOUGH MONEY TO PAY BACK EVERYONE " is to make ASSUMPTIONS about how it could get paid back.
This is bad.............................................Spanish omelette time
Holding bonds = Long war.
(very long)
No Fucking Way! You mean the Spanish banking system might be in trouble? Quick, Italy, lend them some money to prop them up, just 'til the Spanish real estate sector bounces back. We'd ask Germany, but they're being real pricks about lending anybody any money right now.
Italy can't give them any money. They are too busy borrowing money at 7% so they can contribute to the bail out fund and refinance at 3%........I think I just went cross eyed.
They'll make it up on volume, though.
perhaps we can forgive oliver, since spanish may not be his first language...?
and when he leaned to count, his mother insisted he never touch himself...?
There goes number 11 (or 21 if he takes off his shoes)
hey, S_E!
is that a new avatar (+^+) or have you been cloned?
as a fellow furry animalicus of the treeish meadows, i always felt that altho ralph was a working-class bus driver, the whole nightmare worked for him b/c norton worked in the sewers; when he walks thru that door, nobody gives a shit...
as theHoneymooners, it wwas about young kids getting started in the 50's(?) and neither wife worked and they didn't have any kids yet
it was a like madMen, but live, youngLabor, and with a better cast and framing; anyhow, i heard that by the 60's everybody in certain high school crowds watched this show on MSM at home before they went out to the drive-in, and to draggin' and to drinkin' on sat night
you ever hear about that?
How much did they make them mark down the Spanish and Potugease soverigns by?
STD ticker was changed to SAN.
It really doesn,t matter, both are going to zero.
awwww... no more STD contagion puns
Useful to know though if you own SAN puts like I do though. I'm guessing SAN will be going to zero despite the "profit" projections of the stress tests. And who owns a lot of SAN bonds-I'm guessing BBVA which I'm also shorting. And who own BBVA bonds-why SAN and the rest of the EU banks, like DB which I'm also shorting via puts. Its a big circle jerk ponzi of the first magnitude.
Or, as the article states,
"You can't make this shit up..."
You mean mark up. Now that ECB rates the sovereigns they're all AAA. All is well!
Let's hope they don't need FED type fudge factors.
Remember Neal back- of- the- napkin Kashkari?
What did he say, 800 billion?
Meanwhile the FED had to shell out like 26 trillion in backstops to keep the show going?
Roughly a factor of 33.
FWIW
Nah man, they mean it this time. Seriously.
This is a complete rubbish, those Spanish and Italian (et al) banks should be handed over to the master of the universe: MD. He can provide any size of needed liquidity . He even bypassed Angela twice, with his LTRO's so let him do God'sfinal work, Obamernanke will be grateful?
should make for a nice bonus and a .0000001% divi.
I think the Spanish banks can easily make 65 billion in profits. It's not like housing has completely collapsed and unemployment is above 25%. Oh wait....
http://hartzman.blogspot.com/2012/06/george-you-must-immediately-take-down.html
So, is the Media embargoing the Moody's Banks Downgrades until the US Markets close? I thought the European statements were due some time ago. Nothing on the net, yet.
Wait for it...
But, the suspence... it's KILLING ME!!!
I'm filled with antici... ...
We easily accept reality, perhaps because we intuit that nothing is real....shit, gold at $1,566/oz looks cheap!
FLASH CRASH UOIL market has No liquidity NONE
At least gas will be cheaper - oh, no wait, I forgot that the rat fucks who control the pricing mechanisms will be keeping the spread for themselves and continuing to fuck the rest of us at the pumps.
Santander's symbol is no longer STD; now SAN.
Don Quixote heading that way, as soon as Sancho saddles up the horse!
What was the Horses name?
Rocinante!
Skinny but tough, but not Merkel!
Did anyone here really expect the truth?!
Maybe nows the time to parole B. Madoff and let him run the ECB? They need a guy with a proven ability to keep a Ponzi going for nearly 20 years. These EU nannycrats are pikers by comparison.
Must have benn the workstream that was carried out by Roland Berger. OW used ot be a respectable firm.
Spain is simple. Crashing house prices, shrinking loan funds, self feeding crash. Banks will blow out.
http://confoundedinterest.wordpress.com/2012/06/21/spanish-banking-woes-continue-while-mortgage-funding-declines/
I think Zh's view in this subject is extremely naive, biased, and simplistic, although they may be right at the end!!