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Thread: The ECB and a 'European Banking Union'

  1. #46
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    Default Re: The ECB and a 'European Banking Union'

    Germany and France still as far apart as ever at this evening's Finance Ministers meeting..
    Earlier this year, euro zone countries agreed that their rescue fund, the European Stability Mechanism, could provide direct assistance to banks, not just indirectly by lending to governments.This is a key demand of some of Europe's biggest countries - France, Italyand Spain. On Thursday, Germany called that into question.
    Ahead of the meeting, French Finance Minister Pierre Moscovici told reporters: "France continues to believe that we ... must not exclude direct recapitalization by the European Stability Mechanism as a last resort."
    Speaking just yards away, however, Wolfgang Schaeuble, Germany's finance minister, poured cold water on the idea.
    "The German legal position rules it out now," said Schaeuble. "That's well known. I don't know if everyone has registered that."
    Inside the meeting room, people close to the talks said the two clashed again, when Germany asked for the removal of any reference to ESM bank aid from the ministers' statement. He was challenged by Moscovici, who was backed by Spain's Economy Minister Luis de Guindos..
    http://www.reuters.com/article/2013/...&dlvrit=992637

  2. #47
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    Default Re: The ECB and a 'European Banking Union'

    Quote Originally Posted by PaddyJoe View Post
    Germany and France still as far apart as ever at this evening's Finance Ministers meeting..

    http://www.reuters.com/article/2013/...&dlvrit=992637
    They've registered it all right, but they don't want their voters to know.
    “ We cannot withdraw our cards from the game. Were we as silent and mute as stones, our very passivity would be an act. ”
    — Jean-Paul Sartre

  3. #48
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    Default Re: The ECB and a 'European Banking Union'

    Today's Finance Ministers statement on bank stress tests has been released. It's mainly a reaffirmation that banks in trouble will first have to look for private capital and then to national governments for 'resolution mechanisms and public backstops' before turning to the ESM. The Single Supervisory Mechanism is slated to begin on the 4th November 2014('subject to implementation'). That fits with Honohan saying last night that the bank stress tests would be finalized in the last quarter of 2014.
    I noticed Lucinda mentioning on Drivetime that the stress tests are to take place in the first quarter of next year. Not in the loop anymore obviously
    http://www.consilium.europa.eu/uedoc...fin/139613.pdf

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    Default Re: The ECB and a 'European Banking Union'

    I wonder if the lads, and Angela, plan to tackle this rather strange agreement

    Self-securitisation (retained securitisation) is defined as those securitisation transactions done solely for the purpose of using the securities created as collateral with the central bank in order to obtain funding, with no intent to sell them to third-party investors. All of the securities issued by the Structured Finance Vehicle (SFV) for all tranches are owned by the originating bank and remain on its balance sheet.

    The numbers for OFIs presented in sections 2 to 4 of this report include all financial assets of Structured Finance Vehicles (SFVs), regardless of who holds the securitised products. However, in a number of jurisdictions, some of these products are returned back onto the balance sheet of the bank that originally provided the asset to be securitised. This so called self-securitisation, or retained securitisation, is defined as those securitisation transactions done solely for the purpose of using the securities created as collateral with the central bank in order to obtain funding, with no intent to sell them to third-party investors. All of the securities issued by the SFV for all tranches are owned by the originating bank and remain on the bank’s balance sheet, so that third-party investors do not own any of the securities issued by the SFV. These assets should not be included in the shadow banking figure, as prudential consolidation rules consider them as banks’ own assets and as such subject to consolidated supervision and capital requirements.




    http://www.zerohedge.com/news/2013-1...-central-banks
    Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer

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    Default Re: The ECB and a 'European Banking Union'

    Quote Originally Posted by DCon View Post
    I wonder if the lads, and Angela, plan to tackle this rather strange agreement







    http://www.zerohedge.com/news/2013-1...-central-banks

    OMG another successful attempt at making gold out of base metal.

    That should go well.

    “ We cannot withdraw our cards from the game. Were we as silent and mute as stones, our very passivity would be an act. ”
    — Jean-Paul Sartre

  6. #51
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    Weidmann wants bank stress tests to address government debt holdings. Currently under Basel III Government bonds are treated as risk free assets.

    Reuters) - The upcoming European bank stress tests should address banks' holdings of sovereign debt, European Central Bank Governing Council member Jens Weidmann said on Wednesday.

    The ECB will run a series of checks on banks' balance sheets before it will take up responsibility as the euro zone's banking supervisor late next year and Weidmann said the tests would be a success if afterwards trust returned to the sector.

    "And this should also include for example that the stress test also stresses government bonds, which is currently under discussion
    http://www.reuters.com/article/2013/...99T1AR20131030
    Thomas Jefferson : Banking Establishments are More Dangerous to our Liberties than Standing Armies.

  7. #52
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    Default Re: The ECB and a 'European Banking Union'



    Lol.
    “ We cannot withdraw our cards from the game. Were we as silent and mute as stones, our very passivity would be an act. ”
    — Jean-Paul Sartre

  8. #53
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    Looks like an agreement on a banking union deal is on the cards tonight.

    Europe is on the brink of a banking union deal that will bring a “real revolution” to its financial system, France’s finance minister predicted, as he signalled that differences with
    Germany
    on a system to fund failed banks were narrowing.

    Germany has dropped objections to the European Commission, the EU’s executive arm, becoming the main authority for winding up failed banks – as long as no public money or significant resolution funding is required.
    Berlin is also showing openness to a single eurozone fund financed by bank levies, as long as there are clear safeguards that ensure senior creditors and national resolution funds shoulder the costs before European funds or taxpayers do.The details of how this hybrid scheme – essentially a network of national funds under a single umbrella – will operate is likely to be one of the most contentious elements of a final deal. In any event, such a fund will take 10 years or more to reach its target level of about €55bn.France has been among those countries arguing for Brussels to be both in charge of triggering a bank resolution and have access to a common fund to share the costs of shuttering failed banks.
    http://www.ft.com/intl/cms/s/0/fc594...#axzz2mzwUWVSt

  9. #54
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    Default Re: The ECB and a 'European Banking Union'

    Quote Originally Posted by ang View Post
    Weidmann wants bank stress tests to address government debt holdings. Currently under Basel III Government bonds are treated as risk free assets.



    http://www.reuters.com/article/2013/...99T1AR20131030

    [QUOTE]This approach seems to be growing - Not the way Enda and Co assumed breaking links between Sovereign and Bank debt could play out -
    A top official at the European Central Bank has signalled it will try to force eurozone banks to hold capital against sovereign bonds, in an attempt to stop weak lenders using its cash to hoover up the debts of crisis-hit countries.
    In an interview with the Financial Times, Peter Praet, an ECB executive board member, outlined how the central bank could combine its new powers as chief banking regulator with its existing role as currency issuer to toughen up the requirements on sovereign bonds, which have traditionally been classed as risk-free.


    The central bank will try to bring about the change in regulatory thinking using its health check of the eurozone’s 130 biggest lenders alongside any new offer of cheap long-term liquidity.
    Mr Praet said if sovereign bonds were treated “according to the risk that they pose to banks’ capital” during the health check, then lenders would be less likely to use central bank liquidity to buy yet more government debt.
    The vicious cycle that has seen banks use central bank cash to buy government bonds has been partly blamed for prolonging the eurozone financial crisis.

    http://www.ft.com/intl/cms/s/0/7559a...#axzz2nDtwPZu6


    Interesting also from Mr Praet - said that while credit conditions remain “quite normal” for this stage in the economic recovery, there was a risk the tests could lead to a further contraction in lending.

    How is anyone to know what "normal" should be in this type of financial hurricane ?
    Thomas Jefferson : Banking Establishments are More Dangerous to our Liberties than Standing Armies.

  10. #55
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    Default Re: The ECB and a 'European Banking Union'

    Jorg Asmussen a member of the German SPD is to leave the ECB and return to take up a position as junior Labour Minister in the new coalition.

    One of the most influential members of the European Central Bank’s governing council who has been central to Frankfurt’s role in sorting out the eurozone crisis has decided to leave the bank to join the new German governing coalition as a junior minister.
    Jörg Asmussen, who joined the ECB executive board only last year, has been responsible for international and European relations including the proposed eurozone banking union.
    http://www.ft.com/intl/cms/s/0/9a1be...#axzz2nZXbYQos
    Thomas Jefferson : Banking Establishments are More Dangerous to our Liberties than Standing Armies.

  11. #56
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    Default Re: The ECB and a 'European Banking Union'

    European Banking Authority has published 2013 findings on EU banks.

    Links here to EBA transparency release of information - AIB BOI & PTSB have about 18.4 BN exposure to Irish Sovereign bonds -

    Links here to EBA transparency AIB BOI & PTSB have about 18.4 BN exposure to Irish Sovereign bonds

    Sovereign debt and bank debt have been increasingly interwoven, so that default becomes a more and more difficult prospect to achieve.

    http://www.eba.europa.eu/documents/1...6-a7e96dbff115


    http://www.eba.europa.eu/documents/1...e-fdf6eff3ef80

    http://www.eba.europa.eu/documents/10180/524233/IE039.pdf/6754c2d1-d41a-4bbb-973a-ecb2f612b971
    “ We cannot withdraw our cards from the game. Were we as silent and mute as stones, our very passivity would be an act. ”
    — Jean-Paul Sartre

  12. #57
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    Default Re: The ECB and a 'European Banking Union'

    Munchau on the banking agreement:


    The agreement on a eurozone banking union is neither a glass half full, nor half empty. As many commentators are saying, last week’s deal is hideously complex, and a common resolution mechanism with a fiscal backstop for failed banks is pointless.
    Those technical deficiencies apart, the agreement raises two broader, more important questions: why do countries keep on accepting such lousy deals in the first place? (Or to use a seasonal metaphor, why do turkeys keep on voting for Christmas?) And what are the long-term consequences of their actions?

    To answer the first question, it is worth looking at how the debate evolved. Ahead of the negotiations several finance ministers called for a common fiscal backstop that could provide a credit line to the resolution fund. It was a reasonable request. Yet that is precisely what they did not get. All they got were some warm words from Germany that there would be further talks about a backstop within 10 years. Some of the finance ministers tried to put a brave face on this humiliating defeat, pretending that Wolfgang Schäuble, the German finance minister, had given ground on an important principle.
    But that is not the case at all. The banking union that was agreed was the banking union Mr Schäuble always wanted. He does not want German taxpayers to pay for the restructuring of banks in other countries. And he does not want the European Commission, or anybody else, to close down a German bank. If ever there was a game, set, match victory in EU history, this was it.
    So why did the others accept it? Recall the previous discussion on fiscal integration. These culminated in the fiscal compact, a vehicle to deliver permanent austerity by forcing countries to pay down their excessive debt for 20 years. The periphery countries accepted austerity but failed to secure Berlin’s commitment to debt mutualisation as a quid pro quo. Berlin got an all-for-nothing deal: more eurozone fiscal discipline, at no cost to Germany.
    One explanation is that Mr Schäuble is a formidable lawyer and better prepared than his negotiating counterparts. The fundamental reason is that the periphery countries were never able or willing to form an effective coalition against Germany, let alone willing to make a credible threat that they would leave the eurozone without such guarantees. Perhaps they did not trust each other. I am convinced Germany would have budged on some of these issues if confronted with such an existential choice. But it never happened, and now probably never will.
    When it became clear none of the periphery countries would risk such a confrontation, Germany’s position became unassailable. The periphery governments were happy to support whatever Berlin demanded as long as sovereign bond yields were not too high. Their crisis resolution policy consisted of keeping their heads down. And so they kept on voting in favour of successively lousy deals.
    But that policy is very short-sighted, with severe economic consequences, which brings us to the second question. The fiscal compact and its predecessors brought austerity, which had a devastating and lasting impact on gross domestic product. This banking union will produce the financial sector equivalent of austerity – a secular credit crunch.
    To see this, one needs to understand how banking union is going to work. The European Central Bank, in its role as supervisor, has started a comprehensive assessment of the banking sector. As part of this exercise, it assesses financial risks, takes an in-depth look at balance sheets, and subjects banks to stress tests. This exercise is going to end with a demand that some banks raise their capital.
    But without a common fiscal backstop, it lacks credibility. The ECB will be in no position to demand that banks raise capital if there is no backstop. It would risk financial instability if it exposed a bank as undercapitalised that has no access to outside capital. The resolution fund will not be able to help because it will not be fully mutualised for a decade. At the start all risks will remain within the member states.
    Unlike the Federal Deposit and Insurance Corporation of the US, the eurozone’s resolution fund will have no credit line.
    The ECB thus has every incentive to fudge the exercise. This is possible because reviewing a bank balance sheet or a stress test is no exact science. The key variable is the assumption made about the future.
    Unfortunately, a fudge does not change the dire economic reality. An exercise in ending the credit crunch in the banking sector will actually prolong it because the recapitalising banks in the periphery will be put on ice due to a lack of funds.
    Economically, this is 1990s Japan all over again, probably worse given the periphery’s dire economic state. The banking system in the eurozone will not be able to supply the economy with sufficient credit, except in creditor countries. The economic consequences of what finance ministers hailed as a “historic” decision will be substantially negative.

    The periphery finance ministers who accepted this deal know all this. They are not stupid. And still they are not acting in their best interest. If your policy consists of keeping your head down, then perhaps this is the banking union you deserve.
    [email protected]
    The Governmnent, including Gilmore, has been spouting praise of the banking union since Barroso's blast against Ireland They say that with a Banking Union Ireland would not have had an economic bubble and crash. I can't see that, as it was low interest rates that caused the problem in Ireland. A few months before Anglo Irish crashed it was awarded "best bank in Europe titles. No one saw anything wrong.
    “ We cannot withdraw our cards from the game. Were we as silent and mute as stones, our very passivity would be an act. ”
    — Jean-Paul Sartre

  13. #58
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    Default Re: The ECB and a 'European Banking Union'

    France about to be told off

    "What people underestimate is that what's at stake is the entire credibility of the rules," warns one EU official as The WSJ reports, is preparing to reject France’s 2015 budget, that would be the biggest test yet of new powers for Brussels that were designed to prevent a repeat of the eurozone’s sovereign-debt crisis. With the looming handover to former French FinMin Pierre Moscovici (fox, henhouse?) it appears the current European Commission will not stand for Current French FinMin Sapin's plan that would run a budget deficit of 4.3% of GDP next year (far greater than the 3% deficit it had previously promised) put France’s budget in "serious noncompliance" with the new EU rules and risking sanctions of as much as 0.2% of GDP. The credibility of Brussels' new powers threatens to be seriously undermined if big countries such as France and Italy are able to flout the new rules as "it’s not like they will try - and fail; they're actually planning not do it," another EU official said.
    http://www.zerohedge.com/news/2014-1...ng-budget-plan
    Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer

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