The bank run in Europe appears to be underway again, exactly as I have anticipated. Remember, historically, bank runs were mainly instituted by retail investors pulling deposits. Modern day institutions and mechanisms have successfully been implemented to mitigate and stem the tide of such occurrences to an extent that many potentially devastating bank runs have been avoided. The caveat is, a new instigator of the bank run has emerged. Make no mistake about it, the institutional counterparty is the new purveyor of the modern day bank run. For those who have not been following my European bank run rants, see my many warnings to date regarding the highly contagious European bank run below. For those who have been following, skip past the link list to the news excerpts directly below to see what is going on today and coincidentally what we have been working on for the last week - which is just starting to come out into the mainstream media and the sell side analysts water cooler chatter...
It all started as:
- then a research note to subscribers, The Inevitability of Another Bank Crisis,
- followed by blog posts on the same, see Is Another Banking Crisis Inevitable?
- then a full fledged, step by step tutorial on exactly how it will happen....
- The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement
- What Happens When That Juggler Gets Clumsy?
- Let's Walk The Path Of A Potential Pan-European Bank Run, Then Construct Trades To Profit From Such
- The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!
- The Fuel Behind Institutional “Runs on the Bank” Burns Through Europe, Lehman-Style!
- Multiple Botched and Mismanaged Stress Test Have Created The Makings Of A Pan-European Bank Run
- France, As Most Susceptble To Contagion, Will See Its Banks Suffer
- Observations Of French Markets From A Trader's Perspective
- On Your Mark, Get Set, (Bank) Run! The D…
- ECB As European Lender Of Last Resort = Institutional Purveryor Of A Pan-European Ponzi Scheme
First CNBC reports US Markets Indicating Sharp Selloff at Open on European Bank Concerns, This is shortly after reporting, by way of the Wall Street Journal reports: European Central Bank Dollar Loan Signals Euro Stress
The European Central Bank has lent dollars to a eurozone bank for the first time since February in the latest sign of escalating tensions in the region’s financial system.
A single bidder borrowed $500 million for a week, the ECB disclosed on Wednesday, after taking advantage of a facility that has largely lain dormant over the past year.
No details were given but the news suggested that at least one bank was having difficulties obtaining the dollar funds it required.
On its own, the use of the facility did not point to dramatic stress levels in funding markets, analysts said.
But it added to other evidence that European banks were struggling to access some forms of financing for the first time in a couple of years.
The so-called Euribor-OIS swap, a gauge of fear in the banking sector, is at its highest since 2009, while short-term euro basis swaps, which show a strong premium for buying dollars over the single currency, are at the most negative since the collapse of Lehman Brothers.
Meanwhile, the ECB continues to see high levels of funds being parked overnight in its “deposit facility”, rather than being lent to other banks.
“All the indicators are pointing in the same way: banks are becoming more keen to use official sources of liquidity than one month ago. Is it the crisis levels of 2008? No,” said Laurence Mutkin, rates strategist at Morgan Stanley.
Nick Matthews, European economist at Royal Bank of Scotland, said: “It is probably symptomatic of the kind of stresses and strains there are in the system.”
Acting with the US Federal Reserve, the ECB first offered US dollars to euro zone banks at the end of 2007. The program was reactivated after the collapse of Lehman Brothers in late-2008 – and again in May last year, when the euro zone debt crisis was at its most intense.
Any casual reader of BoomBustBlog has been thoroughly forewarned, and all BoomBustBlog subscribers should have their positions firmly in place, ready to monetize this situation after buying volatility on the cheap and short positions at favorable levels - reference the following documents, all produced while volatility was cheap and the subject banks were trading much higher:
- SPY option strategies in violent down moves
- This is the introductory post to a series of trade setups for European Bank at Risk
- and The Inevitability of Another Bank Crisis!
CNBC also reports US Units of Europe Banks Under NY Fed Scrutiny:
The Federal Reserve Bank of New York is intensifying its scrutiny of the U.S. units of Europe's biggest banks amid concerns that Europe's debt crisis could spill into the U.S. banking system, the Wall Street Journal reported citing sources familiar with the matter.
This is quite interesting and timely, for several weeks ago we started our own forensic investigation and many would be surprised at what we have found. All BoomBustBlog subscribers are strongly urged to download today's latest actionable note regarding the big American bank (see Actionable Note on US Bank/ French Bank Run Contagion) closely related to the big bank identified in The French Government Creates A Bank Run? Here I Prove A Run On A French Bank Is Justified And Likely, as excerpted: