Thank god for Dexia's implosion this morning, or else the world would be forced to pay attention to the fact that Greece is still as insolvent as ever and still without a formal Troika approval for disbursement of the critical 6th tranche that Greece needs or else. Also, were it not for Dexia someone might notice that two other banks bit the nationalization bullet in the past 24 hours as the contagion, not from Dexia, but from the fact that there is simply not enough money around: as a result Danish Max Bank and Greek Proton Bank just handed the keys to their HQs to their primary regulators, with the management teams quietly riding off into the sunset. They are the lucky ones: in a few months it won't be nearly as easy to find "nationalization" funding and keep your depositors away from the "tar and feathers" toolshed.
From Reuters on Proton:
Greece's central bank said on Monday it activated a bank rescue fund to save Proton Bank, effectively nationalising the small lender that is under investigation for possible violation of the country's money-laundering laws.
It is the first lender to be nationalised under the Financial Stability Fund (FSF), a safety net set up by Greece and its international lenders for banks that need to recapitalise but cannot raise funds in the market.
Analysts said the move had to do with Proton's own business problems and not with the country's severe debt crisis.
"After recommendation by the Bank of Greece, the Finance Ministry proceeded to apply to Proton Bank a new law about the restoration of banks," the Bank of Greece said in a statement.
The Bank of Greece said Proton was split into a "good bank" where all of its private sector, government deposits and sound assets were transferred. The good bank will have the FSF backstop as its sole shareholder and retain the trade name Proton.
"The 'good bank' is well capitalised, with a capital adequacy ratio that is well above the regulatory threshold. It has access to euro-system liquidity through the Bank of Greece," the central bank said.
And from Bloomberg on Max:
Max Bank A/S became Denmark’s first insolvent lender to test a bank package designed to sidestep the country’s bail-in laws after the state was able to find a buyer and avert senior creditor losses.
Sparekassen Sjaelland A/S will take over parts of Max Bank after it was declared insolvent by the Financial Supervisory Authority, the government said late yesterday. The bank package under which the takeover will be engineered allows Sparekassen Sjaelland to tap Denmark’s guarantee fund to subsidize the purchase, while the state will take on some bad loans. Senior creditors will be spared, while shareholders will lose their investments.
“I’m pleased that the new consolidation initiatives, which are backed by a broad majority in parliament, have proven workable,” Economy and Growth Minister Ole Sohn said in a statement on the ministry’s website. “This solution means that no depositors or other simple creditors in Max Bank will lose money.”
The maneuver allows Max Bank to avoid Europe’s toughest bank resolution laws, which had led to senior bondholder losses twice since February. Those credit events had left international funding markets closed to most of Denmark’s roughly 120 banks. Lawmakers last month passed the consolidation bill in an effort to avoid triggering more senior creditor losses and to help banks return to bond markets and generate funds needed to avoid a credit crunch.
"It's all Bush's Fault" - don't be confused and rush to judge the banks as being "insolvent" insolvent, there is a damn good reason why both banks went tits up, or so the regulators will tell you:
Proton's woes erupted this summer after it disclosed it was being probed by the central bank on money laundering violations related to transactions by its main shareholder.
"The activation of the Financial Stability Fund for Proton Bank has nothing to do with its exposure to Greek sovereign bonds but it has to do with its bad loans' portfolio," said a Greek-based bank analyst who declined to be named.
“Max Bank had fallen into a regrettable situation,” Sohn said. “The FSA’s inspection showed that the bank no longer lived up to its solvency requirements primarily because of its engagements within real estate.”
Sparekassen Sjaelland will take over all private and corporate clients at Max Bank with engagements of less than 5 million kroner ($900,000) a piece, the government said. The remaining commitments will be transferred to a unit of The Financial Stability Company, the state’s winding-down arm, it sai
Yes sadly, there always is a reason. In the meantime, the net resultis that "bailout" funds are becoming depleted, credit ratings are getting even more strained, and eventually even the whole "good bank/bad bank" paradigm which has suddenly taken Europe by storm will fail once the vicious math of continental bail outs hits home, and Europe's last attempt at kicking the can fails, as it will... In a few months.
But for now, it's rally monkey time, the only question is what is the half life of this particular global attempt at sticking one's head in the sand.