tag:blogger.com,1999:blog-8764541874043694159.post2312673349086037976..comments2024-03-29T10:48:38.142+00:00Comments on Coppola Comment: The Great Greek Bank Drama, Act II: The HeistFrances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-8764541874043694159.post-12072073688482411742015-07-22T14:09:48.287+01:002015-07-22T14:09:48.287+01:00All this and not a mention of the systemic failure...All this and not a mention of the systemic failure of the Eurozone and the complicity of banks and bribes that got Greece to join Euro in the first place. Nothing about the democratic will of the people. Capitalism is failing and economics whether Classical or Neo-Classical don't have the answers. Sooner or later the bubbles will explode, there is no blueprint for transition, the future in the present situation is pretty bleak...<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-1982405944368905722015-07-22T10:05:28.796+01:002015-07-22T10:05:28.796+01:00I believe that the bail in will probably occur wit...I believe that the bail in will probably occur within 2015,have no idea if ESM will step in much later.<br />Also, its possible to see deposits under 100.000€ to get hit by a small percentage<br />But for the moment,Tsipras is struggling to keep his government together,snap elections can be called anytime and that could jeopardize any schedule<br /><br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-79879169337860269022015-07-21T22:28:29.951+01:002015-07-21T22:28:29.951+01:00However much Schäuble and Merkel want to dress it ...However much Schäuble and Merkel want to dress it up, they have used the HFSF, EFSF and ESM to move all exposure by banks to Greece (whether by German, French or Greek banks) onto the shoulders of European taxpayers, particularly German taxpayers. Why the German taxpayers admire Dr Schäuble, defies logic. Deutsche bank is reputed to have a €60 trillion exposure to forex derivatives. Deutsche only have €2 trillion in CDS default insurance. The two CEOs of Deutsche Bank were fired a few weeks ago, hinting at the huge problems besetting the German bank. Schäuble and Merkel find themselves in a terrible bind - a bind which Tsipras and Varoufakis tried to exploit.<br />The Greeks actually need to exit the Euro to prevent contagion by the German banks.Anonymoushttps://www.blogger.com/profile/15032831966976229089noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-78797890162453268162015-07-21T19:11:53.410+01:002015-07-21T19:11:53.410+01:00Actually the rot set in in September 2014 when Sam...Actually the rot set in in September 2014 when Samaras said Greece could leave the bailout program early: http://uk.reuters.com/article/2014/09/23/uk-eurozone-greece-germany-idUKKCN0HI1AD20140923<br /><br />Investors got cold feet at the prospect of Greek govt not being supervised. Bond yields rose from October onwards. http://www.tradingeconomics.com/charts/greece-government-bond-yield.png?s=gggb10yr&d1=20140101&d2=20151231<br /><br />I agree things got much worse when it became evident Syriza would win the election, but that was not the cause of the Q4 2014 downturn. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-72510589238707683042015-07-21T19:02:20.429+01:002015-07-21T19:02:20.429+01:00You obviously aren't aware that a new decree b...You obviously aren't aware that a new decree bans people from using existing deposits to repay loans at the same bank. I'd say that is setting the scene for a bail-in. <br /><br />The 30% figure is a ballpark estimate from a number of sources. It does need to be checked. However, ECB's figure for corporate deposits seems low to me. I'd guess they have not treated microbusiness deposits as "corporate". In Greece this would seriously understate business deposits. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-47776737703626622522015-07-21T18:53:34.025+01:002015-07-21T18:53:34.025+01:00Yes, but they unfortunately require the ECB to coo...Yes, but they unfortunately require the ECB to cooperate. Not at all clear that it would do so. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-80125773181850209092015-07-21T18:50:39.711+01:002015-07-21T18:50:39.711+01:00Well, there are two issues here. Firstly, because ...Well, there are two issues here. Firstly, because of deposit flight from December 2014 onwards Greek banks needed far more liquidity. It's this that I was referring to. However, I have conflated ECB funding with ELA. Up to the end of February, Greek banks were able to obtain the additional liquidity they needed from the ECB. At the end of February, however, because of uncertainty over the future of Greece's bailout programme, the ECB revoked access to funding for Greek banks, forcing them to use ELA funding from the Bank of Greece, which is more expensive. But even ELA is subject to ECB control, and ECB capped it on 28th June. Hence the bank closures and capital controls. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-58939353990394629172015-07-21T00:55:56.339+01:002015-07-21T00:55:56.339+01:00Frances,
you said "Greece's banks have ...Frances, <br /><br />you said "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."<br />If my memory is fresh enough, starting ELA was the consequence of a conversation between Draghi and Varoufakis. After that, the ECB decided to stop funding Greek banks, and the only option was ELA... <br /><br />RegardsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-81881007999885163622015-07-21T00:34:03.074+01:002015-07-21T00:34:03.074+01:00In general, I think at this point, much of the bla...In general, I think at this point, much of the blather about the euro currency's "popularity" is effectively mere propaganda, to be dismissed in favor or more nuanced assessment of a community's opportunities and affordances when it comes to being able to manage (let alone *like*) a currency.shah8https://www.blogger.com/profile/04537529816304128000noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-5424265502909272842015-07-20T14:27:38.393+01:002015-07-20T14:27:38.393+01:00As I read your post, I found myself needing to lea...As I read your post, I found myself needing to learn more about the BRRD ( Bank Recovery and Resolution Directive). I soon came to the conclusion that the BRRD contemplates individual bank structures that might fail, not entire central bank failure of one member nation. Would you agree that the BRRD is not correctly structured for the Greek situation where the entire nation is suffering national bankruptcy?<br /><br />I find myself forced to consider that the Greek nation is much better described as a company-structure rather than a national-structure. Of course the big difference between the two descriptive structures is that nations can print their own currency but companies can not. <br /><br />If we think of the Greek nation as a company, we find that the Greek business model results in more money leaving the model than is brought in. Loans have filled the gap for years. Now the lender has decided that the Greek national company is bankrupt. Greece has a problem. The lenders have a problem. The people of Greece have a problem.<br /><br />It seems to me that Greece, whether considered as a nation or a company, needs a new business plan. The new business plan must <b> balance money flows </b> between Greece and all foreign trading partners. The new business plan would be very similar to the new business plan that comes out of a bankruptcy settlement.<br /><br />If we follow the line of thinking outlined here, we would need to see the BRRD enhanced with a national bankruptcy provision. There needs to be a procedure to aid and repair countries that have been declared bankrupt by their trading partners.Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-2398244015505683202015-07-20T14:16:57.773+01:002015-07-20T14:16:57.773+01:00I was clearly under the impression that bail-in wa...<i>I was clearly under the impression that bail-in was a one-off in Cyprus, trying to get at money-laundering Russians. Now, all of a sudden, it is official policy.</i><br /><br />Don't you believe it. Read <a href="http://www.oftwominds.com/blogapr13/Cyprus-template4-13.html" rel="nofollow">this link</a> which shows that it was not Russian or even British ex-pat money that caused the crisis in Cyprus. It was our old friends, the large, well-connected Eurozone banks. <br />ProfessorPelotardhttps://www.blogger.com/profile/02142654894875877769noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-46509001095682370852015-07-20T13:39:39.495+01:002015-07-20T13:39:39.495+01:00"The more I look at it, the less benign this ..."The more I look at it, the less benign this bailout deal appears. Indeed it looks to me as if it was set up to do considerable damage to the Greek economy"<br /><br />Exactly, who want to be bullied by Regling (ESM) after being bullied by Draghi (ECB). They are not credible as liquidity providers, running their institutions as debt collection agencies.<br /><br />So other alternatives are available:<br /><br />https://radicaleconomicthought.wordpress.com/2015/07/20/bank-rescue-advice-to-greece-follow-the-germans/<br /><br />(1) run your own bad bank<br />(2) get ECB to deal with bad debts<br />(3) get ECB funding for insolvent banks<br /><br />All three solutions do not need another 25bn, and should therefore be preferred by the Greeks.Matt Usselmannhttp://radicaleconomicthought.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-12452931662630426462015-07-20T13:08:48.825+01:002015-07-20T13:08:48.825+01:00Very good post trying to explain what would actual...Very good post trying to explain what would actually happen.<br /><br />It seems that the threat of bail-in of depositors to the banking system is enough to cause a bank run. It is clear that even discussions of that will get everybody to think about the money in their banks and move it.<br /><br />I was clearly under the impression that bail-in was a one-off in Cyprus, trying to get at money-laundering Russians. Now, all of a sudden, it is official policy.<br /><br />I know what I would do if I had money in an account in Spain, or Italy now. Move it as quickly as I can to Germany or Switzerland.<br /><br />It just shows that people trying to deal with the crisis are completely struggling. What they propose will make it worse.<br /><br />Matt Usselmannhttp://radicaleconomicthought.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-31597818552400999352015-07-20T12:14:25.348+01:002015-07-20T12:14:25.348+01:00Euro-friendly goverments, FAILED
IMF-ECB-EU's ...Euro-friendly goverments, FAILED<br />IMF-ECB-EU's proposals FAILED<br /><br />SYRIZA's problem was the ultimatum: Either you vote whatever we tell you, or you will be the first govenment that will face deposit's ...haircut (not to mention other severe measures against Greece)<br /><br />EU was the worst solution for countries like Greece AND is trapped inAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-67146103966750378682015-07-20T12:09:53.370+01:002015-07-20T12:09:53.370+01:00"Just to" point out that the main factor..."Just to" point out that the main factor on the Q4 recession was caused by the possibility of Syriza coming to power in Q1"<br /><br />Rubbish supply side explanation.<br />The recession was mainly because the summer was over and austerity remained. Most of the few jobs created were eliminated by the seasonal tourism end of temporary contracts. Also exports were lower because of the deflation in Europe, especially in agriculture and some industrial items. Demand side was the issue in Q4(not just in Greece but Europe)<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-41161142613558682042015-07-20T11:10:01.837+01:002015-07-20T11:10:01.837+01:00It did not open today....It did not open today....ProfessorPelotardhttps://www.blogger.com/profile/02142654894875877769noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-89231002774099003862015-07-20T10:52:42.277+01:002015-07-20T10:52:42.277+01:00Frances,
Just to point out that the main factor o...Frances,<br /><br />Just to point out that the main factor on the Q4 recession was caused by the possibility of Syriza coming to power in Q1. Markets and a sizable part of the Greek people were already fearing what a Syriza government would be and there were already a reduction in deposits.<br /><br />Greece voted in the worst possible government for them, they were not competent enough to develop and push a plan to get the country of the Euro, and they couldn't push the structural reforms this country sorely needs. Basically the moment the Greeks elected Syriza they voted for their society implosion, so I think the net result of getting a Troika-mandated government is still a win compared to what Syriza would if pushed out of the Euro without a plan.<br /><br /><br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-66385066137978582122015-07-20T10:48:58.495+01:002015-07-20T10:48:58.495+01:00"The remaining uninsured deposits - about 30%..."The remaining uninsured deposits - about 30% of the deposit base - are mainly the working capital of Greek businesses" -- doesn't compute, ECB website says 13B of corporate deposits as of 2015-05, probably <10B by now, and some of this is likely <100K protected, so this is much smaller than 30% of the deposit base. I would guess it's mostly rich grannies who don't read zerohedge. Where does the 30% number come from anyway?<br /><br />"The creditors are in no mood to cut Greece any slack" -- the creditors aren't a uniform self-consistent bunch. The Finnish finance minister is not the one who will do the bank resolutions. From a reasonable insolvency practitioner point of view, it makes no sense to nuke the tiny working capital of the businesses who owe you long term loans (doom loop: a bail-in will cause further impairment to the loan book. wasn't so circular in Cyprus). Besides once the banks are ESM-owned, any trick to feed them some money may not be monetary financing of (national) governments anymore, so the toolset may be more flexible.<br /><br />Also a point to note is that internal capital flight is still allowed (e.g. prepay taxes or loans, use poorer family members' unused insured deposit allowance, split between multiple Greek banks, etc) which is not very consistent with a planned(!) bail-in.cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-69903792784483407632015-07-20T09:36:16.845+01:002015-07-20T09:36:16.845+01:00This is a complex argument which I will admit upfr...This is a complex argument which I will admit upfront I do not have the competence to understand. However, since I have been following the news of Greece closely over the last six months, it seems to me that everything was hiding in plain sight. If one listened to the rhetoric of Jeroen Djisselbloem from the moment the ECB began to pressure Greece, Djisselbloem was constantly being quoted in the media, either with attriibution or via transparent leak, that a "Cyprus-style" bail in was in the cards for Greece. This seemed plainly designed to accelerate the ongoing slow motion bank run, since it is impossible to believe Djisselbloem would not be aware of the impact of his words. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-60995826394423217052015-07-20T08:40:00.014+01:002015-07-20T08:40:00.014+01:00"ESM recapitalisation is de facto nationalisa..."ESM recapitalisation is de facto nationalisation of the banks by Greece's Eurozone creditors".<br /><br />So I guess the WSJ was right and shareholders can expect their entire equity to be wiped out...<br />I wonder how can the Greek stock exchange be opened at this point, it's going to be a complete massacre...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-42742151504170653682015-07-20T06:34:55.925+01:002015-07-20T06:34:55.925+01:00Thank you. A very informative blog entry.
The fou...Thank you. A very informative blog entry.<br /><br />The four research reports I have read (RBS, Morgan Stanle, Citi, Auto) assessing Greek bank liabilities and likely restructuring, range in the potential implications for depositors. I personally agree with the scepticism of your assessment and have to agree that judging from prior conditions and the effects on the Greek economy - serious concerns are entirely justified. <br /><br />I understand Germany and Spain have both submitted draft laws/bills intending to define country specific rules on the composition of the BRRD Liability Stack. The similarity between the two models would imply little room for the peculiarities of Greek banking under the regulation. Additionally, both models place Corporate Deposits in the deluge 'waterfall of loss absorption' before Retail and SME deposits, which are in the most protected position. I suspect bigger corporations will end up the winners.<br /><br />According to the reports I mention, it appears, for Retail and SME depositors, there could be exposure of up to 40% of deposits over 8,000 Euros. This would be dreadful. However, as you mention the banks' balance sheets are really very different; Alpha bank appears in relatively much better shape, whereas Eurobank is in the least desirable position. I wonder how the liabilities between the four banks will be distributed in the final restructuring. For some Greek savers this would be the second time their savings have taken a haircut; and of course the nationalised banks will be sold not to replenish the state coffers but to satisfy the appetites of European officials who continue to work under clearly delirious notions. <br /><br />This does not look good for anyone, nor the image of the Euro in Greece. Since arriving in Athens it's clear the Euro is already much less popular than it used to be. The intended manufacture of a bitter split from the Euro might well drive a highly punitive approach to the restructuring. Clearly this is debt no one wants to own (and debt no one has to own incidentally, given the Eurozone's penchant for Special Purpose Entities). <br /><br />Sean @papertrilbyAnonymousnoreply@blogger.com