Thread: European Bank Leverage- Explained

European Bank Leverage- Explained

http://www.youtube.com/watch?v=igoDhHyD ... r_embedded

Oct 17, 2011

analysis, banks, financial meltdown, economic collapse, bank failure, financial analysis, equity analysis

French Banks Can Set Off Contagion That Will Make Central Bankers Long For The Good 'Ole Lehman Collapse Days!

Submitted by Reggie Middleton
10/17/2011 13:46 -0400
many many links on this post

I took the weekend off and all types of nonsense occurs in my wake.
Well, I'm back with some fresh research. Subscribers, we have found
another bank at risk (and you know how well the other banks that we
targeted fared in the past - Bear, Lehman, the entire French banking
system, etc.) and will be releasing the research in the next 24 hours.
In the meantime, I would like to address the massive bear market
rally/short squeeze that probably created many a draw down. First, a
little misdirection and disinformation as reported by CNBC: Greek 'Haircut' No Threat to French Banks: Noyer

French
banks could cope with a significant Greek "haircut"—a private sector
writedown of Greek bonds—but it is still possible that the country's
financial institutions may have to be recapitalized, Christian Noyer,
governor of the Bank of France, told CNBC.

"Greece
is not a problem for the French banks," Noyer said. "The total
(exposure) of the French banks to Greek sovereign debt is significantly
smaller than the first half of profits for the French banking system."

That exposure amounts to roughly 8 billion euros, while French banks' first-half profits totaled about 11 billion euros.

Still,
Noyer would not rule out recapitalization for banks in France, given
that all of Europe's banks' could face mandatory increases to their
required capital base, depending on a decision by the European Bank
Authority (EBA), the European Union's banking regulator.

Where shall I begin? Well, Reuters reports German Finance Minister Insists Greek Debt Haircut Should Be At Least 50-60%, as excerpted:

Greece's
debt crisis cannot be solved without larger write downs on Greek debt
and governments are trying to persuade banks to accept this, German
Finance Minister Wolfgang Schaeuble said on Sunday, just days ahead of a
key EU summit.

Asked
in the interview with ARD whether there could be a Greek debt
write-down of as much as 50-60 percent, Schaeuble said: "A lasting
solution for Greece is not possible without a debt write-down, and this will likely have to be higher than that considered in the summer."

In
July, private creditors agreed to a voluntary write-down of 21 percent
on their Greek debt, a figure which now looks insufficient. Euro zone
officials said last week losses are now likely to be between 30 and 50
percent.

"Of
course we would like, if possible, to agree together with the banks.
That is why we will be discussing things with them. But it is clear,
there must be a level of participation which is enough to bring about a
lasting solution for Greece. That is enormously difficult," Schaeuble
said.

The market has an even higher implied actual haircut! Analysis - Greek debt enters Argentina-style twilight zone

Reuters - Even that would be a better deal than levels of a 60 to 70 percent haircut currently priced into Greek debt. Most Greek bonds are trading at around 35 cents on the euro. For emerging market players with experience of Argentina, which defaulted on $100 ...
Of
course, a little useless financial engineering can make things all good
right? Yeah, right! You see, what looked like a bad deal just a week
ago... EU Officials: Private Sector Bondholders Could Expect 30-50% Haircut Business Insider - ‎Eurozone officials told Reuters today that the private sector will likely see a 30-50% haircut on holdings of Greek bonds
if they participate in a debt swap deal. That's far more than the 21%
that had been expected under the initial terms of the July ...

Looks like a hell of a bargain today... Greek Bond Deal: Too Good to Last

Wall Street Journal (blog) - Reason 2: As we have pointed out before, a sharp fall in Greek bond
prices since July 21 makes the bond swap look like an even better deal
to bondholders. The new bonds they would receive through the exchange
have other benefits to investors—they ...
Pointless Greek bond swap dead — long live pointless Greek bond swap

FT Alphaville (blog) - For all we know, the terms of the current bond swap may simply be tweaked to get the “newâ€