Peek under the lid of the Dutch housing market. It’s awfully idiosyncratic in there. Also it’s doing rather badly and has been the subject of recent, significant tax reforms that will drastically change its shape in the coming decades.
Right into the deep end, with this chart released last week by Statistics Netherlands (CBS):
The irony police dropped by FT Alphaville on Tuesday. They asked us to reverse back to the last European bank bailout before Cyprus: the nationalisation of Dutch financial group SNS Reaal. The government of the Netherlands, complete with a finance minister by the name of Jeroen Dijsselbloem (have you heard of him?), used their freshly minted Intervention Act to expropriate the shareholders and subordinated bondholders in order to help finance the February 1st nationalisation. Read more
The latest bank-sovereign crisis always gets the most attention. Despite the best of intentions, no amount of preparation can get the current flair-up ready to have its place in the limelight stolen. Once torn, salt is rubbed into the wound by means of nasty comparisons that disrespect the unique nature of one’s distress. Ireland is not Greece! Portugal is not Ireland! Italy is not Spain! And Cyprus is special because of gangsta finance and its reliance on deposits for funding…
Grow up. Everyone has problems.
That said, we’ve carved out a special place in our schedules this morning to spend some quality time with one of the middle children. Aren’t we good? And so to the Netherlands, where the government nationalised SNS Reaal, the parent company of SNS Bank, on February 1st. It used its shiny new Intervention Act and everything. Read more
FT Alphaville is currently experiencing a sensation of rubbernecking around the recently nationalised Dutch financial group SNS Reaal.
With two separate wrecks on either side of the motorway to gape at, it’s hard to look away. On one side, there is all that went wrong with the financial group, and its ultimate fate. With a turn of the head, there are credit derivatives referencing SNS Bank for which payouts were triggered when the government swooped in.
Here, we digest news of the arrest of another suspect in an investigation into alleged fraud at the Property Finance unit of SNS Bank. This reached us on Wednesday courtesy of Vasco van der Boon reporting for Het Financieele Dagblad (FD). The failure of SNS Bank is in many ways the failure of this unit, so it’s worth a bit of a history lesson before proceeding to the actual allegations. Read more
When James Mac is away, the bloggers will play, but this is a rather serious tale. It relates to the nationalisation of SNS Bank, inclusive of its holding company SNS Reaal.
The above video tells the story of one investor in SNS Bank subordinated bonds. Read more
SNS Reaal’s sub expropriation was a restructuring credit event after all, according to 14 of the 15 Isda determinations committee members on Wednesday:
Raise your hand if you didn’t first hear about the way in which the Dutch government took over ailing SNS Reaal on February 1st and think ‘oh, really now?’ along with an arched eyebrow.
The mechanics of the takeover are interesting indeed, but given that two of the four largest Dutch banks have been nationalised, we have a bigger picture question:
How much warning was there that SNS Reaal was on the brink? Read more
As expected, the eurozone economy shrunk in the third quarter. But, fortunately, not by quite as much as expected.
Thursday’s data did, however, confirm that the debt crisis in southern Europe is hitting the ‘core’ economies in northern Europe, and analysts seem in agreement that it’s going to get significantly worse. Read more
On Monday the centre-right Liberal and centre-left Labour parties in the Netherlands managed to pull together a coalition agreement after 47 days of talks. It contained a limit to the tax deduction on mortgage interest, which some economists say distorted the Dutch housing market. There are also changes to benefits and taxes, but the thing that caught one FT Alphaville reader’s eye was this line of the agreement:
De hoogte van de maximale variabele beloning binnen de financiële sector wordt wettelijk vastgelegd op 20 procent van de vaste beloning.
We’re translating this as: “the amount of variable pay for workers in the financial sector will by law be capped at 20 per cent of fixed pay.” Read more
“I’m really sick of this government giving away our taxes to those corrupt Greeks,” said the owner of a pet shop in Amsterdam who asked not to be identified by name because he does not declare all his income to the authorities.
How on Earth did we miss this last week, via Reuters? (H/T Pawelmorski) Read more
Finland is a rare stable Aaa-rated credit in the eurozone, according to the ratings agency, which placed Germany, the Netherlands and Luxembourg on a negative outlook.
Possible contingent liabilities from rescuing Spain and/or Italy loomed large. Read more
Netherlands got its (very small) sale away in undramatic fashion following the collapse of its government. From Reuters:
The Netherlands sold 1 billion euros of 3.75 per cent notes maturing in 2014 at an average yield on 0.523 per cent and 995 million euros of 4 per cent bonds maturing in 2037 at an average yield on 2.782 per cent. Read more
Matt Steinglass, the FT’s Netherlands correspondent, submits this guest post about the projected Dutch budget deficit and how language affects attitudes towards debt.
The Dutch Central Planning Bureau plunged the country’s political scene into a maelstrom on Thursday by releasing figures estimating the country’s budget deficit will reach 4.5 per cent of GDP in 2013. Read more
From the European Commission vice-president (Digital Agenda), interviewed in the Dutch paper Volkskrant, via Google translate…
“…But there is absolutely no man overboard when we miss someone from the eurozone…Maybe my word choice was not entirely happy. What is a man overboard? They always said: if a country lets you off or ask to get out, then the whole edifice collapsed in. But that’s just not true… “ Read more
(We’ll get our coat)
Since there’s a question-mark over who’s going to buy the circa €200bn of fresh eurozone sovereign debt being sold in the first three months of 2012… Read more
The Netherlands’ largest financial services company ING Groep said it will cut 2,000 jobs at its Dutch retail bank despite reporting a sharp rise in third-quarter net profit, the Wall Street Journal reports. ING said income was under pressure and that it must step up efforts to cut costs in what it described as a “leaner environment.” The Journal says that the group will scrap 2,000 jobs at its retail bank in the Netherlands, which should result in €300m ($ 412.4m) in annual savings as of 2014. It makes ING the latest major European financial institution to restructure against a backdrop of tighter regulation and economic uncertainties due to the euro-zone debt crisis. That came as the group reported a sharp rise in third-quarter net profit of €1.69bn from €239m in the same period a year earlier. The results were boosted by capital gains from a number of divestments. According to Bloomberg, ING wrote down its holdings of Greek sovereign debt to market value as of Sept. 30, representing a reduction of about 60 per cent and leading to a 467m-euro pretax impairment. Read more
Some nasty bond moves in the eurozone sovereign debt “senior tranche” at pixel time (also in CDS — chart via Markit)…
(DBR – Germany, FRTR – France, BELG – Belgium, UKIN – United Kingdom, included for solidarité) Read more
The European Union should appoint a new budget tsar with powers to dictate taxes and spending in eurozone countries and who could ultimately adjudicate whether countries should be kicked out of the euro, the Dutch prime minister has argued. Writing in the Financial Times, Mark Rutte and his government’s finance minister, Jan Kees de Jager, said the new “commissioner for budgetary discipline” should be given the authority to impose a gradually more painful series of penalties on profligate eurozone countries, including the withholding of EU development funds. But if a country continues to flout EU demands for spending restraint, Mr Rutte’s plan would force eurozone countries to submit their budgets to the commissioner, who could veto it before it is presented to parliament. Over the long term, Mr Rutte said, the eurozone should force countries to leave the euro if it did not abide by the commissioner’s ruling. Read more
Weaker consumer confidence in parts of Europe will dent Heineken’s profits in the second half of this year, its management warned, leading to flat bottom line organic growth in 2011 despite a 4 per cent increase in the first half, the FT reports. The Dutch brewer said wider economic concerns had already caused it to “experience weakness” in the high-selling July and August season, also reflecting bad weather and the absence of major sporting events such as the football Its gloomy outlook comes only a day after a closely watched indicator of consumer confidence in the eurozone plunged at its fastest monthly rate in 20 years, surpassing even the falls in the wake of the collapse of Lehman Brothers. The downgraded forecast means that full-year profit before exceptional items and goodwill, Heineken’s favoured metric, will be flat for 2011, at €1.45bn ($2.09bn), compared to a €1.68bn expected by analysts. That is despite a 3.9 per cent year-on-year increase in the first half of 2011, to €1.26bn. Net Profit fell from €700m to €605m, below market expectations.world cup. Read more
Britain and the Netherlands have vowed to take Iceland to court over €4bn ($5.8bn) lost in the failed Icesave bank after a deal to repay the money was rejected for a second time by Icelandic voters in a referendum, the FT reports. The result represented an act of defiance by Iceland’s crisis-hit electorate, with nearly 60 per cent voting against the deal in spite of warnings that a No vote could disrupt the country’s economic recovery and scupper its bid to join the European Union. The British and Dutch governments made clear there was no room for further negotiation with Reykjavik, setting the stage for an international court to decide who is responsible for foreign deposits lost when Iceland’s banking sector collapsed in 2008. The dispute involves money deposited by British and Dutch customers in the Icesave unit of bankrupt Landsbanki. They were reimbursed by domestic deposit insurance schemes, leaving the UK and Dutch treasuries out of pocket. Read more
Eurozone peripheral government bonds rallied on Tuesday after successful debt auctions and a reported intervention by the ECB, despite investor caution ahead of Wednesday’s Portugese bond auction, reports the FT. Greek, Italian and Dutch bonds saw strong demand, with Greece raising €1.95bn ($2.5bn) in 26-week Treasury bills at yields of 4.9% – slightly higher than its sale of similar debt in November. Foreign investors bought 40% of the issue in a positive sign for Athens, which has previously relied on domestic investors. Italy, which has seen borrowing costs rise, sold €7bn in 12-month bills at 2.06% as order books rose to €11.4bn. The Netherlands sold €3.25bn of three-year bonds at a yield of 1.29% – again in line with expectations. Read more
Brussels’ expanding ambition is colliding with European Union member states’ austerity drive as the parties struggle to reach agreement over the 2011 budget, the FT reports. The gulf between them will be revealed next week when the European parliament is expected to approve a proposal to increase the EU budget by 5.9 per cent next year to €142.6bn ($198bn). That is double the 2.9 per cent increase offered by the member states in July – and massively above the spending freeze pushed for by a group of states, including the UK and the Netherlands, where governments are under pressure to slash billions of euros from their budgets. Read more
Let’s be honest — we can’t really explain most of this (HT @pkedrosky), emphasis ours:
We model the spreading of a crisis by constructing a global economic network and applying the Susceptible-Infected-Recovered (SIR) epidemic model with a variable probability of infection. The probability of infection depends on the strength of economic relations between the pair of countries, and the strength of the target country. It is expected that a crisis which originates in a large country, such as the USA, has the potential to spread globally, like the recent crisis. Surprisingly we show that also countries with much lower GDP, such as Belgium, are able to initiate a global crisis. Using the k-shell decomposition method to quantify the spreading power (of a node), we obtain a measure of “centrality” as a spreader of each country in the economic network. We thus rank the different countries according to the shell they belong to, and find the 12 most central countries. These countries are the most likely to spread a crisis globally. Of these 12 only six are large economies, while the other six are medium/small ones, a result that could not have been otherwise anticipated. Furthermore, we use our model to predict the crisis spreading potential of countries belonging to different shells according to the crisis magnitude. Read more
The Dutch government demanded a “cultural change” within the central bank on Tuesday after a report into the collapse last year of DSB, a small retail bank, found that the regulator should not have issued the controversial lender with a banking licence, reports the FT. The criticism adds pressure on central bank president Nout Wellink after the finance ministry asked for a plan to change the bank’s culture within a month. The ministry pledged legislative changes to give the central bank’s supervisory board oversight of its regulatory duties. Read more
With the 2010 World Cup a mere three weeks away, the trickle of investment bank World Cup research continues apace. Yes, suddenly all the analysts have become football experts going on bookies, reports FT Alphaville. According to the quants, Brazil is seen as the strongest team taking part in the tournament but the world cup winners will be England. Read more
The first European securitised real-estate debt this year has been raised for a Dutch property investment fund in a sign that the market for such asset-backed bonds is beginning to revive, reports the FT. Vesteda, which owns 27,000 residential properties across the Netherlands, has raised €350m ($471m) through a commercial mortgage backed securitisation. Read more
When FT Alphaville met with BNP Paribas’ head of currencies Hans Redeker in an informal meeting a couple weeks back, one of the subjects discussed was the need for a weaker euro to stimulate German exports beyond the Eurozone to offset falling demand from within Europe.
On Thursday, BNP Paribas’ FX team makes the point again in reference to the Greek fiscal crisis. Read more
The non-call risk which has haunted hybrid bonds, or subordinated debt, in recent months appears to have spread — all the way to Dutch RMBS.
Recall that a number of hybrid bonds have been downgraded recently, on the presumption that banks which received government funds are under pressure by the European Commission not to call their callable securities (the thinking is that this will force bondholders to `burden share’ some of the banking bailouts). Read more
Still uncertain as to the relevance of all the fuss over tottering Eastern European, South American or Asian economies? Uncertainty begone. Says JP Morgan’s Joyce Chang, via Felix Salmon:
QED: The EM corporate loan market is now five times the size of the corporate bond market. Read more
A major European Q1 datafest arrived on Friday. Blasting through all the figures released so far this morning, however, the following news jumps out.
From Bloomberg: Read more