Following the results of the Asset Quality Review and Stress Tests before the end of the year, the bail in instrument will apply for senior debt bondholders whereas bail in of depositors is excluded.
– Eurogroup statement on Greece, August 14th
Which ‘instrument’ might that be for wiping the senior bonds of under-capitalised Greek banks? Read more
Barclays have assessed the Greek banks which, prior to Monday’s “deal,” were in a precarious position.
Since the crisis hit Greece more than five years ago, we estimate that Greek GDP has regressed to levels not seen since 1998 and is still falling. The impact of this has been dramatic on the banking system. The banks have lost nearly 25% of their deposit base since December 2014. Confidence has evaporated on the banking system, leading to the imposition of tight capital controls immediately after the call for a referendum by the Greek government on 26 June, as a fully-fledged bank run hit the banking system. Profitability and asset quality have also turned for the worst in 2015. Despite the super-capitalisation of Greek banks under the second programme, banks will in all likelihood now require further capital injections to deal with rising nonperforming assets
Greece has had a break from the headlines recently, but how long can it last? With a banking system that’s soon going to need shoring up again, probably not long. Read more
Well, see if you can make out what they’re saying here.
With a new government in place and market focus shifted to Spain and Italy’s debt issues, Greece has been enjoying a bit of welcome breathing space.
The country’s banks have been seeing steady inflows since the election two weeks ago, according to Reuters (emphasis ours): Read more
Time was when Credit Agricole expected 2012 to be the year Emporiki, its Greek subsidiary, finally turned a pre-tax profit.
NOT HALTING. SHIFTING. THEN IT GOES BACK LATER.
Today was really not the best day for the ECB to signal this: Read more
That’s our (no doubt dodgy it was: fixed) paraphrasing of President Karolos Papoulias of Greece, during Sunday’s talks with the leaders of the New Democrats, PASOK, and Syriza.
Οι διαφορές των θέσεών σας είναι μικρές και ασήμαντες σε σύγκριση με το χρέος σας απέναντι στην πατρίδ
FT Alphaville has been very curious about the €18bn of mystery Emergency Liquidity Assistance which showed up in the ECB’s financial report at the end of April, but until now we weren’t sure where the cash had ended up.
We had a few guesses of course, but no proof. ELA is essentially a bank bailout by national authorities when things get really, really bad and it is typically lending (or a repo) against collateral the ECB itself won’t accept. Read more
Updates – Oops. The original version of this presentation seems to date from October last year, although the details remain current. In any case, if it does date to October, we should make that clear. Apologies! Even so, it’s critical to understanding the Finnish collateral agreement. And it’s not like we have much else to go on.
This blog post by Osmi Soininvaara, a Finnish Green MP who has read the agreement, is also worth a read (H/T JussiR in comments). Soininvaara defends the reason for secrecy (to protect the other counterparties to the deal). But he argues that you don’t need to know the secret bits to know it’s a poor deal. He does have a point if there are legitimate business reasons to encrypt some parts of the deal, but we would still argue it’s important to know how credit events are defined, and how exactly the reference assets in this swap work. Read more
Amid the bailout suspense, the Athens stock index chugs higher…
Greece is not printing its own money already. No drachmas are being issued by Greece, nor is there monetisation of public debt. However….
And with that rather tantalising intro — Stephane Deo of UBS blows the lid off something we’ve been wondering about Greece for a while. Read more
There was a nice line in the FT’s latest story on Greece’s debt restructuring:
Questions are also being raised about the ECB’s estimated €45bn of Greek sovereign holdings. Collective action clauses are likely to be introduced into Greek bonds by the PSI deal, leaving the ECB – which has said it will not participate in the voluntary restructuring – potentially in an uncomfortable position in the future. “The ECB’s holding will be the story to watch in the next few months,” a person close to bondholders said.
There’s so much to read in the IMF’s latest report into Greece’s bailout, released on Tuesday…
Although firstly we just want to point out what the Fund says about an increasing lack of cash inside the Greek state. It’s in this excerpt of the report (page 8): Read more
Three of Greece’s biggest banks have issued €6.4bn ($8.8bn) of government-guaranteed bonds likely to be used as security to obtain financing from central banks, a move that points to worsening market conditions amid talk of a disorderly Greek default, reports the FT. Alpha Bank, EFG and Piraeus on Friday issued the floating-rate notes, which analysts say will probably be used as part of a new €30bn liquidity facility created for cash-strapped Greek banks earlier this year. Under the scheme, Greek banks can issue bonds guaranteed by the government, which can then be used as collateral to receive funding from central banks.
Greek RMBS news that makes you go hmm (via Fitch, earlier):
Fitch Ratings-London-31 October 2011: Greek banks and RMBS transactions are at risk of losing interest payments because a Greek housing agency has delayed, if not frozen, paying interest subsidies. Read more
There’s been plenty of comment, and prodding, about how European politicians need to man (and woman) up, bite the bullet, and start acting with conviction. After all, with every passing day, the price tag rises as the level of distress increases and lack of growth butts up against austerity measures.
Take, for example, the slow hollowing out of Greek banks, which suffer not only for their holdings of their government’s debt, but also from the flight of depositors. Every wonder exactly how much deposit flight there has already been? Credit Suisse has your back on that one, chart below: Read more
Update — See reader comment below. This may be a case of mistaken identity (or a Bank of Greece accounting change), not liquidity usage in July. We stand corrected if this is accounting changes. ELA’s not easy to spot!
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From the English edition of Kathmerini (hat-tip to a reader):
The prospect of a freeze in payments appeared even more serious on Thursday, after Greek commercial banks failed to cover the sum of 300 million euros of supplementary, noncompetitive bids for Tuesday’s auction of T-bills, providing only 155 million. The shortfall is interpreted as a clear message by banks to the government that they are unwilling to fund future issues of T-bills.
Things you might not have noticed in recent Greek bank results:
Eurobank EFG ability to generate recurring profits is reflected in pre provision income, which amounted to €749m in 1H2011 or €324m in 2Q2011, slightly down by 3.5% over 1Q2011, mainly due to lower trading income, higher net interest income and lower costs.
Matina Stevis, a Greek journalist reporting from Athens, submits this guest post for FT Alphaville.
A doubly exciting piece of news sent Blackberries abuzz across Greek beaches today, violating the sacred Saturday lunchtime of the last August weekend. Alpha Bank and EFG Eurobank, the second and third largest Greek lenders, are to merge. And not only that, but they reportedly have a brave new investor in the form of the investment arm of a Qatari fund — possibly Paramount Services Holding Limited, and cue the visualisations of a gallant man with headscarf on a white horse. Read more
There are two fun things about BNP Paribas’ €534m Greek bond impairment (sat right at the top of its second-quarter results press release…)
Not, in fact, a statement on the tourist denizens of Agia Napa.
There’s one thing you should know about Cypriot sovereign debt entering a full-blown crisis (S&P had just downgraded to BBB+ at pixel time, following Moody’s). There isn’t actually a lot of debt about, and what is, isn’t in bonds, but in bills, commercial paper and also medium-term notes. Read more
Hey European banks! Have you seen this?
[International Accounting Standards IAS39 - Paragraph 59] A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. It may not be possible to identify a single, discrete event that caused the impairment. Rather the combined effect of several events may have caused the impairment … [these events can include] a) significant financial difficulty of the issuer or obligor; …
Because some day you might want a detailed breakdown of how Europe’s banks are accounting for their Greek, Spanish — and even Italian — bonds, here’s a helpful table from Deutsche Bank.
It comes from Mohit Kumar and Abhishek Singhania, who’ve crunched the stress test data: Read more
This is the authentic, accept-no-elisions list of financial institutions in support of the IIF’s Greece financing offer:
It’s been the source of much confusion on Monday, as Greek banks mysteriously disappeared from an original list – only to appear later once again. (And throughout it’s been clear that they would have the strongest incentives/disincentives of all to swap their bonds, making the situation all the more outlandish). BBVA and BayernLB were also shunted off and then back on the list. Read more
Chart from SocGen’s stress test note:
Actually, to put a number on it, the Greek banking system and the two biggest Cypriot lenders possess €13.8bn more exposure to the Greek sovereign than we thought they did, according to stress test disclosures.
We’ve noted the contrast between those disclosures and previous estimates below. The exercise has a Mr Creosote feel about it. We already knew that Greek banks were dangerously stuffed with debt from their own sovereign and sovereign default was a major threat at €42.1bn of estimated exposure, never mind at €54.4bn. Read more