Monday, July 20, 2015

The Coming Greek Bank Nationalizations, Privitizations and Bail- ins

As I ended the earlier post from today:  The Man Who Cost Greece Billions

 Today the Greeks are 'rewarded' to huge price increase on everything. And their saviour, Tsipras, showed his true nature- That of the betrayer & destroyer of Greece and it's people.

The coming Greek bank nationalization, bail-in and privatization

Excerpted: read more at link directly above-
The banks are re-opening, though just for transactions, so people can pay their bills and their taxes, pay in cheques, that kind of thing. The cash withdrawal limit has been changed to a weekly limit of 420 EUR per card per person, enabling households to manage their cash flow better. But the capital controls remain: money cannot leave the country without the agreement of the Finance Ministry. And the banks remain short of cash: although the ECB has raised the funding limit by 900m EUR, that only amounts to about 80 EUR per Greek so won’t go very far. But the tourist season is in full swing, and tourists have been advised to bring cash into the country rather than using ATMs in Greece. On balance, therefore, Greece’s monetary conditions should be easing.
But there is another tranche of bailout conditions to be agreed by the Greek Parliament by Wednesday 22nd July:
  • the adoption of the Code of Civil Procedure, which is a major overhaul of procedures and arrangements for the civil justice system and can significantly accelerate the judicial process and reduce costs;
  • the transposition of the BRRD with support from the European Commission.
The first of these is relatively uncontroversial, though a tall order to implement at the speed that the creditors demand. But the second has serious implications for Greek banks and their customers, especially in the light of this part of the bailout agreement:
Given the acute challenges of the Greek financial sector, the total envelope of a possible new ESM programme would have to include the establishment of a buffer of EUR 10 to 25bn for the banking sector in order to address potential bank recapitalisation needs and resolution costs, of which EUR 10bn would be made available immediately in a segregated account at the ESM.
The Euro Summit is aware that a rapid decision on a new programme is a condition to allow banks to reopen, thus avoiding an increase in the total financing envelope. The ECB/SSM will conduct a comprehensive assessment after the summer. The overall buffer will cater for possible capital shortfalls following the comprehensive assessment after the legal framework is applied.
Back in the autumn of 2014, the ECB & EBA conducted stress tests on European banks, including all four of Greece’s large banks (which together make up about 90% of its banking sector). The Greek banks at that time passed the stress tests and were deemed solvent. They are now supervised not by Greek regulatory bodies, but directly by the ECB under the Single Supervisory Mechanism (SSM).
Yet now, eight months later, sufficient damage has apparently been done to Greece’s banks to render them collectively insolvent. What on earth has gone wrong?
Greece’s banks have suffered a continual deposit drain since the beginning of the year. This is how they became dependent on emergency liquidity assistance (ELA) funding from the Bank of Greece. But liquidity shortfalls do not cause insolvency unless they are covered by means of asset fire sales. In this case, the liquidity drain was until 28th June covered by ELA. Collateral has to be pledged for ELA funding, and Greek banks consequently found their balance sheets becoming more and more encumbered. To make matters worse, the ECB recently increased collateral haircuts for Greek banks. Now the banks are reopening, it is not clear how much collateral they have left for ELA funding. Whether the ECB will relax collateral requirements to allow a wider range of assets to be pledged remains to be seen. It is probably conditional on good behaviour by the Greek sovereign.
But it is not the funding side of Greek banks that is the real problem. It is the asset base.
Greece went into recession in Q4 2014 (yes, BEFORE Syriza came to power). Since then, there has been a considerable fall in output caused mainly by lack of confidence. On top of this, the Greek sovereign has been running substantial primary surpluses all year in order to maintain payments to  creditors in the absence of bailout funding. It has done this not by collecting more taxes but by a considerable squeeze on public spending: this has mainly taken the form of delaying payments to the private sector. Additionally, the private sector itself has cut back spending and investment. The result is that real incomes have tumbled, unemployment has risen and loan defaults have increased. Non-performing loans in the Greek banking sector were already high at the beginning of the year but are now believed to have risen substantially. This is the principal cause of the possible insolvency of Greek banks.
So the bailout plan includes recapitalisation of the banks using a loan from the European Stability Mechanism. This loan would be repaid from sales of sequestered assets in the privatisation fund that also forms part of the bailout agreement (my emphasis):
  • to develop a significantly scaled up privatisation programme with improved governance;  valuable Greek assets will be transferred to an independent fund that will monetize the assets through privatisations and other means. The monetization of the assets will be one source to make the scheduled repayment of the new loan of ESM and generate over the life of the new loan a targeted total of EUR 50bn of which EUR 25bn will be used for the repayment of recapitalization of banks and other assets and 50 % of every remaining euro (i.e. 50% of EUR 25bn) will be used for decreasing the debt to GDP ratio and the remaining 50 % will be used for investments.
So, let’s put this jigsaw puzzle together.
1. Greek banks are currently reopening for transactions only. The cash withdrawal limit is likely to remain in place for the whole of the summer, effectively limiting Greeks’ ability to hoard physical cash, and the capital controls that prevent money being moved outside the country will also remain in place.
2. The Greek government is required to fast-track through legislation to implement the European Bank Resolution & Recovery Directive in Greece. Once implemented, bank resolutions will involve bail-in of unsecured creditors.
3. In the autumn, the ECB/SSM will conduct another asset quality review of Greek banks to determine their solvency. Most estimates of the expected capital shortfall seem to be of the order of 15bn EUR without including deferred tax assets (DTAs), a form of capital extensively used in Greek banks that the ECB has already indicated it intends to phase out. If the ECB excludes DTAs from the CET1 definition, the bill would be at least double that.
4. Once the outcome of the asset quality review is known, the Greek banks will be recapitalised by the ESM. This implies use of the ESM’s direct recapitalisation facility, which will not be available until January 2016. The banks would be supported by ELA until then, but the cash withdrawal limit and capital controls would remain in place to prevent cash hoarding and capital flight. So Greeks face the prospect of continuing restrictions on access to and use of funds for at least the rest of the year.
There are two significant implications of using the ESM’s direct recapitalisation facility.
Firstly,  ESM recapitalisation is de facto nationalisation of the banks by Greece’s Eurozone creditors, bypassing the Greek sovereign. Once the banks were recapitalised and – presumably – relieved of their non-performing loans, they would be sold back to the private sector. The proceeds of their sale would go to pay back the ESM loans. The asset privatisation fund therefore implicitly includes all the Greek banks. Not many people seem to have understood this.
Secondly, the ESM’s direct recapitalisation tool requires bail-in of 8% of liabilities. Silvia Merler at Bruegel explains what this would mean for Greek bank bondholders and depositors:
Bail-in would require full haircut of subordinated/other bonds, full haircut of senior non-guaranteed bonds and still a haircut of uninsured deposits ranging between 13% and 39% for three out of four banks. This would already bring all banks above the 4.5% CET1 threshold and two of the banks above 8% CET1. The remaining capital shortfall would be covered by the ESM and Greece together, but the Greek contribution could be suspended. The ESM would effectively play only a very limited role.

Banks stealing the money of the people............

Last bit I will include from the linked article

 The last time uninsured deposits were haircut was the resolution of Cyprus’s two failing banks in 2013. On that occasion, a reasonably large proportion of the cost was borne by foreign depositors, principally Russians, although Cypriot businesses, institutions and households also took a hit. One interesting effect of the Cyprus bail-in was that non-performing loans increased: people whose deposits were frozen were too angry to service their loans. The economic consequence of the Cypriot bank failures, including deposit bail-in, was a fall in GDP of around 6%:
So, last time foreign depositors took a hit- mostly Russians- This time? The Greeks will take the hit and the GDP will fall. And this is saving Greece?

10 comments:

  1. "Thousands of refugees in Greece" are apparently heading northwards. if the photos of the trains in Macedonia are genuine, then the desperation and opportunism is very apparent.

    http://www.globalresearch.ca/thousands-of-refugees-flee-northward-from-greece/5463345

    Tens of thousands more refugees are in Greece, and what of the millions of Albanians, Romanians, etc. and the Greeks themselves who might decide to join the great tidal wave northwards?

    The potential for chaos is massive and there are already protests and counter protests in several European countries. Europe is a powder keg that needs just a false flag provocation or two to trigger mass hysteria.

    Cue the French president who calls for the transfer of all sovereignty from European nation states to Brussels. The article describes the current climate very well and mentions Deutsche Bank as a possible source for a Continental meltdown.

    Anthony

    http://www.globalresearch.ca/the-president-of-france-wants-eurozone-members-to-transfer-their-sovereignty-to-a-united-states-of-europe/5463350

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    Replies
    1. Hi Anthony
      Not only did Hollande call for a transfer of power to Brussels- He also played the EU 1 & 2 card
      So, he hedged all the bets. I had another article ready to post, but, thought I would leave these two for now

      I'm hoping my fellow Canadians and our neighbour's in America are paying attention because this is being done to all of us too- the americans are taking it worse right now- the massive influx of illegals etc
      and the disintegration of their culture and nation- coming north to Canada
      heads up!

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    2. Good article Anthony!

      exactly along the lines of the point I was making in two previous posts
      From July 15/15:
      The Straw that Breaks the Euro Area- Full Integration or an Amicable Split
      http://pennyforyourthoughts2.blogspot.ca/2015/07/greece-straw-that-breaks-euro-area-full.html

      Rehashed July 17/15:
      http://pennyforyourthoughts2.blogspot.ca/2015/07/greece-eu-there-is-no-agreement-eu-and.html

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    3. @transfer of sovereignty to a united states of europe

      But was not that precisely the aim of the Pan-European movement founded by the Count Richard von Coudenhove-Kalergi and the son of the last Austro-Hungarian Emperor (Karl), Franz Joseph Otto Robert Maria Anton Karl Max Heinrich Sixtus Xavier Felix Renatus Ludwig Gaetan Pius Ignatius von Habsburg, aka Otto von Habsburg, in 1923?

      "The International Paneuropean Union, also referred to as the Paneuropean Movement and the Pan-Europa Movement, is the oldest European unification movement. It began with the publishing of Count Richard Nikolaus von Coudenhove-Kalergi's manifesto Paneuropa (1923), which presented the idea of a unified European State. Coudenhove-Kalergi, a member of the Bohemian Coudenhove-Kalergi family and the son of an Austro-Hungarian diplomat and a Japanese mother, was the organisation's central figure and President until his death in 1972."
      "His original vision was for a world divided into only five states: a United States of Europe that would link continental countries with French and Italian possessions in Africa; a Pan-American Union encompassing North and South Americas; the British Commonwealth circling the globe; the USSR spanning Eurasia; and a Pan-Asian Union whereby Japan and China would control most of the Pacific. To him, the only hope for a Europe devastated by war was to federate along lines that the Hungary-born Romanian Aurel Popovici and others had proposed for the by then just dissolved multinational Empire of Austria-Hungary. According to Coudenhove-Kalergi, Pan-Europe would encompass and extend a more flexible and more competitive Austria-Hungary, with English serving as world language, spoken by everyone in addition to his native tongue. He believed that individualism and socialism would learn to cooperate instead of compete, and urged that capitalism and communism cross-fertilize each other just as the Protestant Reformation had spurred the Catholic Church to regenerate itself."

      Now for what lays further beneath the "vision of the Count":

      "According to his autobiography, at the beginning of 1924 he came through Baron Louis de Rothschild in contact with Max Warburg who offered to finance his movement for the next 3 years giving him 60,000 gold marks; Warburg eventually remained sincerely interested in the movement for his entire life and served as an intermediate man as to bring him in contact with influential personalities in America such as banker Paul Warburg and financier Bernard Baruch accompanying him there."

      He was even more clear in his book Praktischer Idealismus (Practical Idealism):

      "The man of the future will be of mixed race. Today's races and classes will gradually disappear owing to the vanishing of space, time, and prejudice. The Eurasian-Negroid race of the future, similar in its appearance to the Ancient Egyptians, will replace the diversity of peoples with a diversity of individuals.
      Instead of destroying European Jewry, Europe, against its own will, refined and educated this people into a future leader-nation through this artificial selection process. No wonder that this people, that escaped Ghetto-Prison, developed into a spiritual nobility of Europe. Therefore a gracious Providence provided Europe with a new race of nobility by the Grace of Spirit. This happened at the moment when Europe’s feudal aristocracy became dilapidated, and thanks to Jewish emancipation."
      Note that the Count was a the best example of the future "nobility", of mixed German, Greek, Japanese ancestry, serially married to Jewesses.

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    4. Mixed Races, eh?

      The planet was not designed for that. The planet was made for diversity.
      Yes, it does happen, but, over all this planet overflows with diversity- mono culture of anything is against life itself- so this elite plan is against life. All life.

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  2. Hi Penny,

    Remember my comment about the self-hating Germans and the Lemming syndrome. Well I just happened to come across the following short video of Gregor Gysi, member of the Left party (Die Linke).

    Now Gysi is the son of a pre and post war German communist and is described a 3/8 Jewish ancestry.

    Here is the video. Note his smile as he comments on more Germans dying than being born "Fortunately" he adds. He then mentions the low birth rates of the "Nazis", but Germany has a tiny minority of Neo nazis who really have little impact on the overall birth rate, so it is fair to understand his comment as a reference to a larger group of "Nazis", Basically, anyone who rejects the multi-culti new order.

    https://www.youtube.com/watch?v=riQh4Qpvxm4

    His quote even makes his wiki profile.

    https://en.wikipedia.org/wiki/Gregor_Gysi

    "In 2015, Gysi referred to native Germans as "Nazis" and claimed that their lower birth rates were "very fortunate." He is quoted as saying "Every year more native Germans die than there are born. That is very fortunate".

    The immigration debate is heating up in Germany. Bavaria, which is on the front line of the illegal immigration wave, has called for all applications for asylum from south east europe to be rejected. There were also calls from some western German politicians for more refugees to be settled in the east, especially in rural areas / small towns where the population has been declining.

    So high percentage German native regions, with low birth rates and high emigration would be filled with assorted foreigners with high birth rates and later influxes of friends and family.

    Sounds like ethnic cleansing to me. A decade or two is all it would take to have swathes of Germany dominated by non Germans with no sense of history or allegiance to the German nation.

    The ultimate zionist revenge porn fantasy?

    Anthony

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    Replies
    1. Anthony; it's all so frightening- that's all I can say- without feeling like crying :(

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    2. Hi Penny,

      Yes, in many ways it's frightening, and we are oberving global events from relative bastions of security, thus far anyway.

      However, there is our strength. Even though we might have very easily succumbed to the lures of materialism, our consciences were raw enough to be awakened to injustices even when they didn't directly impact us.

      For a while now, I've had a motto for these dark days. Whatever happens "retain your humanity". Whatever the future holds in store, I hope to be strong enough to still live through my heart with enough courage to stand up for truth.

      The bad guys simply can't appreciate this. They are cold to the bone and although they have demonic intelligence to guide them, they are blind to the powers of love and the wisdom of the heart.

      Yes, they plan to flood Europe and all of the white gentile world with immigrants, but my personal experience has been that the very good and the very bad seem to be pretty evenly distributed across all nations. In fact, the number of good from so called second world and third world countries often exceeds those from the zombified first world.

      I don't claim to know why all of this is necessary, and although I often have the feeling of watching a slow motion train crash, I do feel deep down that good will overcome evil. Exactly how that will pan out I don't know, but evil has it's limitations which is why we can read their script so easily.

      Crying is fine Penny. It shows that your heart is alive and well. Combined with courage and intelligence, it makes you formidable!

      Anthony

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    3. Hi Anthony:

      Thanks for those kind words Anthony, that means a lot to me :)

      My heart is alive and well and I can't tell you how much it hurts some day, literally and physically, for all that is going on. For future generations.

      It's way past time for people to stop participating in this system as much as possible- There should be a garden in every yard (where possible) and people should be teaching themselves skills to survive so they can avoid the slave trap set for us by the elites.

      The sorry state of our food should be incentive enough to get people motivated!

      I was riding bikes with my brother yesterday and we talked about this situation and I espoused the same theory to him as I do here- we have to hit them where it hurts( money) we have to tell everyone we know, we have to go back to communicating to one another- face to face- we have to make our families THE priority- we have to move in opposition to elite plans- With conscious awareness.

      The control we would deny the elites along with the energy they take from us, would be denied them... this would have a great affect

      but I still see passivity and laziness- and it saddens me greatly

      as for myself- still doing what I can here on the blog and in the real world
      though some days it gets overwhelming

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