ARmy Rumour SErvice

Originally Posted by Flight

Alsacien you are merely quisling. That data merely shows that the financial sector overall is relatively healthy.

The crisis is one of solveny, not liquidity. Hence tackling my point (Wordsworth's point really) that the French banks are highly likely to crash by pointing to banks in Europe as a whole is rather a strange argument. It merely masks the inbalances which have led to the crisis.

Either you don't understand it or you don't like the conclusions and have no answer.

Frankly I have no idea what you are asking for, what exactly is the question - French banking liquidity, capital, eligible assets, use of the standing facility?

Edit.
The link was in response to a question regarding the ECB balance sheet, so I provided a link to the balance sheet....
I don't mind providing information or answering questions to those who are genuinely interested, but I'm not interested in having an argument based on something you read in the papers. Neither do I have a lot of time to invest.

Originally Posted by Alsacien

I sincerely hope I do to you.

How could you not?

Originally Posted by Alsacien

I don't mind providing information or answering questions to those who are genuinely interested.

OK - two serious questions:

1) Is there an easy way to find out how much sovereign debt the ECB is holding for each of the PIGGS? I can find the aggregated figure, but I'm not sure where to find the individual figures. (From what I've read, you can only extrapolate this information).

2) If its agreed that Greek sovereign debt will get a 50% haircut, the banks obviously take the hit. Will the ECB keep the debt it holds valued at face (long term maturity) value or will it have to 'mark to market'?

The two answers let me know how much the ECB will have to write (or not write) its debt down by in the event of a Greek default. I want to compare that to the ECB's reserves, etc, which I know.

Wordsmith

"Frankly I have no idea what you are asking for, what exactly is the question - French banking liquidity, capital, eligible assets, use of the standing facility?"

Effectively all of the above.

Originally Posted by Wordsmith

OK - two serious questions:

1) Is there an easy way to find out how much sovereign debt the ECB is holding for each of the PIGGS? I can find the aggregated figure, but I'm not sure where to find the individual figures. (From what I've read, you can only extrapolate this information).

2) If its agreed that Greek sovereign debt will get a 50% haircut, the banks obviously take the hit. Will the ECB keep the debt it holds valued at face (long term maturity) value or will it have to 'mark to market'?

The two answers let me know how much the ECB will have to write (or not write) its debt down by in the event of a Greek default. I want to compare that to the ECB's reserves, etc, which I know.

Wordsmith

You should read this overview of how the whole distribution of balance, liabilities and assets works within the Eurosystem:
http://www.ecb.int/pub/pdf/other/gendoc2011en.pdf because the ECB blurs with the Eurosystem on most issues.

1. The ECB has only entered the covered bond market directly once with its 60 billion CBPP operation, and (tbc on 3/11/11) CBPP2 for an additional 40 billion. Therefore that is its maximum possible holding across all.
In addition to that you have the SMP which is not public domain for obvious reasons, currently that account varies and is at 169.5 billion in total mentioned here:
ECB: Open market operations - it is considered a fine tuning operation under "ad hoc communications".

2. It does not matter, it would be an almost insignificant reduction in assets.

Assets are important not reserves. You can simply create more reserves if you have enough assets (notwithstanding creating another problem). Refer to the eligible assets db at the ECB.

Originally Posted by Flight

"Frankly I have no idea what you are asking for, what exactly is the question - French banking liquidity, capital, eligible assets, use of the standing facility?"

Effectively all of the above.

Quick answer because I really cannot be bothered to surf around looking for public domain information.
French banks exposure to Greek debt amounts in total to roughly 8 billion euros which may get written down by 50%, put in perspective they will make over 20 billion euros profit in 2011.
If they need recapitalising in the short term it will only be to meet new higher capital holding requirements.

"French banks exposure to Greek debt amounts in total to roughly 8 billion euros which may get written down by 50%, put in perspective they will make over 20 billion euros profit in 2011."

So you say...

The Bank for International Settlements says something entirely different, putting the total at over 50 billion Euros.

"2. It does not matter, it would be an almost insignificant reduction in assets.
Assets are important not reserves. You can simply create more reserves if you have enough assets (notwithstanding creating another problem). Refer to the eligible assets db at the ECB."

The German run ECB is going to print money? I'd ask the Germans first, they've been there before and they've already ruled it out.

As for assets versus reserves you're still missing the point. Individual banks collectively have ample assets however they are certainly not in the right places to prevent the French banks in particular from collapsing under their Greek inspired haircut, which is now being touted at 75% by the IMF.

Indeed if all was rosy and perfectly normal, as you appear to be making out, why has the ECB had to lend to at least two Eurozone banks at above market rates in the last couple of months?

It was the same mechanism that sent Northern Rock to the scrapyard. Interestingly the ECB hasn't named the banks, whereas the Bank of England did, citing EU regulations.

Originally Posted by Wordsmith

I regard my mortgage as a good illustration of the problems.

I took out a 20 year mortgage on my present property - say for £100K after taking into account the equity from my previous house. I ensured that after my other outgoings, I had enough money to pay my mortgage with a decent cushion in hand. I am running a big deficit, but I have invested prudently and for the long term.

There are less prudent people who have also taken out mortgages for more than they can afford. They had enough money to pay the bills and mortgage in the good times - they are now in arrears in their payments and set to lose their properties.

And that's what running a deficit means - you can either invest it prudently for the long term, or you can over extend yourself and lose large amounts of money.

Greece has chosen the latter alternative...

Wordsmith

Congratulations, you are a model of fiscal rectitude with a sound 20 year business cycle.

Of course there are a couple of huge differences with your prudent mortgage and sovereign debt. In most states the bank can seize the property it made the loan on while sovereign debt creditors have limited legal recourse and can and do find themselves stared down by national governments. You also can't devalue the currency the debt is denominated in a problem Greece shares.

I'd not be too morally superior about the Greeks, there are other feckless borrowers out there. Thanks to a bout of property mania the typical Brit now regards high levels of personnel debt as normal. Average family debt is set to reach £77,000 (£303bn) by 2015. Part of the reason for that is lowering public spending will simply shift debt onto private books as folks go in up to their ears to keep up appearances. And that is, like deferring spending on things like infrastructure, is just booting the can down the road.

From early in the summer McKinsey Reveals Britain as Most Indebted Nation in the World

That combined figure that includes the UK's fairly typical deficit is actually pretty scary, at some point a economy as leveraged as Mr Micawber will not be able to handle the vig and fall off a cliff into a deep recession which is what is happening in the US.

A Ponzi scheme might be a better metaphor for Greece given Goldman helped them to cook their books. It's more like their elite went to a loan shark to finance a bloody good Friday night bender for Popa and his hangers on rather than paying the rent. Now Lenny the leg breaker has taken the front door, put Popa in casualty and is eyeing up Mom and the twins potential as a street whores.