The FT reports that an intimate group of 12 banks has been contacted by ISDA to begin preliminary contingency plans in anticipation of a European country leaving the euro. Don't panic: just because banks are mobilizing it simply means that there is no chance of Greece, er, any country ever getting kicked out of Europe, as this would be predicated by a sovereign bankruptcy. And the stress test even refused to consider that alternative, which once again confirms that the stress test is completely right and watertight while ISDA is simply being foolish for not having faith in the Kardinals of Keynesianism. In other news, the market will only go up always, faster, forever.
From the FT:
While those close to the process believe the likelihood of such an event is remote, the sovereign debt crisis of recent months has led banks and other firms to start questioning what impact it could have.
The moves are at an early stage and it is still unclear who would be part of the group.
One person close to the process said that because of the sensitivity of the issue only a small number of members, about 12, predominantly banks but also investors, had been approached.
A spokeswoman for the International Swaps and Derivatives Association (ISDA) said the move expressed “no view as to the likelihood of such an event occurring”, but that the organisation had decided to establish a group to “explore the different scenarios in which a country may leave the eurozone and consider what legal and documentation issues could arise in each for the (over-the-counter) derivatives markets and what steps would be necessary in order to address them”.
But have no fear - the spin brigade is here:
While the event could technically have an impact on any trade or financial contract denominated in euros that is linked to the ejected country, early-stage thinking is that this would not be expected to constitute an event of default – unlike the bankruptcy of Lehman Brothers for example, which was a counterparty to billions of dollars in derivatives trades.
Mmmk. A Lehman bankruptcy ordained by the broker-dealer(s) who wanted to steal the Lehman/Bear/Merrill OTC/fixed income business, and which was more than contained by the Fed giving everyone a perpetual backstop, having more impact than a hundred billion dollar economy collapsing and likely starting a civil war... This is the kind of stupidity that one would imagine to be the propaganda backbone in the stress test, which is precisely why everyone's conviction level that the only thing coming out of the ruling elites are lies, lies and more lies is at an all time high.