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Wednesday, 6 November 2013

War of banks!

from Mr. vasilis viliardos

With the stress test of 124 European banks , which plans to have completed by the end of November 2014 the ECB prior to oversee them, it becomes yet another step aimed at banking consolidation - which of course " apefchetai " the Germany , knowing the enormity of the banking problems in Spain , Italy, Netherlands and so on.

But whatever the attitude of Germany , can not wonder why exactly benefits this test - even though , according to the governor of the ECB , the aim is transparency, so as to restore the confidence of international investors in European banks ( which increased their capital by 225 billion €, and even helped with € 275 billion from the states) .

Because we do not forget that the k.Draghi is a former executive of Goldman Sachs, we wonder who will actually win the intended transparency - especially when banks are not an identical group that has common interests. In contrast , competition between banks is " murderous ", while the environment in which they operate , metaphorically resembles a pool shark , in which a shark fights to the death with each other.

More specifically, a bank can " kill " the other in one night - which turned out to date, " sudden failures " of smaller, when the major stopped to inject liquidity.

Lately not , the interbank market has stopped working - since no bank lends officially the other due to a lack of trust between them . At the same time , the financial sector becomes more opaque due to the existence of shadow banks - through which " connections" official bank kept hidden .

In addition , credit to the real economy are no longer the real battlefield of banks - after the war shall be conducted with derivatives through which bets one bank against another , with " public enemy" of their customers. Besides the recession , which has plunged Europe , coupled with rising unemployment , act negatively on the provision of credit by banks - which are longer this process is damaging and avoid them.

It is assumed , therefore, that the battle between the banks will continue to be conducted in the field of derivatives - in which the profits are large, while working at full opacity within one uncontrolled , dark market .

In this case , knowing that investing in derivatives ( in the table below , the derivative contracts of 25 major players ) is essentially a bet, but which is better not to rely on luck , the real master of the game is the one who ensures internal information - ie those in possession of secret information on the individual victim or opponent, knowing the weak point.

By extension , the stress test of European banks , ensuring the large investment banks their internal information on the balance sheets of rival candidates or their victims - making it essentially an assessment of their financial situation (Due Diligence), which is visible only to " vultures " of the financial system, while paid with taxpayers' money .

More simply , the prospective buyer of a bank gets free information relating to its financial position , its secrets , its advantages and disadvantages , without the know all those " fools " who buy bank shares from the stock exchanges - having the ability either to buy or to the bankrupt , or earned through the derivatives market from both the acquisition by third parties and the bankruptcy .

In this context , the ratings of Greek banks from the Black Rock are not as " angelic ", nor in the interest of our country , as you might think - having completely other considerations.

Further , the potential speculation by large investment banks are huge , especially in conjunction with that , the big bankers persuaded politicians to guarantee , through the state and therefore the taxpayers , derivatives - a scandal unprecedented , but which kept secret, since not disclosed. Derivatives then turned into " safe port " in a safe haven that is, through a series of laws .

To achieve this condition was to change the law "On banks fail " - the bankruptcy law. According to the new institutional framework , therefore , if a bank owns the debt instruments acquired through derivatives ( where to buy a 100 €, you often need a lot less than 10 €), you can withhold if the another bank , from which bought bankrupt .

The advantage of this legislation , which is virtually synonymous with confiscation of property without a court order , is that the creditor bank advantageously treated , " preferably " - as , for example, IMF loans , the repayment of which precedes than anything else.

The classical bankruptcy law , except the staff of a company , all the creditors , all those words in which a company , which goes bankrupt , owes money , they have the same rights - for proceeds resulting from the liquidation .

But under the new law , he who wins is just the creditor bank - while all other lenders lose their money ( depositors , bondholders , shareholders , public, staff , etc.).

In this context, when any bankrupt in the future some banks such as Lehman Brothers in the past, the big winners will be those other banks , which have lent the help of derivatives.

This means that when you close a bank, the others will grow , until finally one left : the winner - while the chart below shows the needs of banks , based a more realistic scenario " Basel III ."
Continuing , the major players of banking and investment market (Goldman Sachs, Barclays, JP-Morgan, Deutsche Bank, Silver Point, Black Rock , etc. ) are the contenders for first place - "eating" many smaller can , but do not mangled themselves .

Given is that in Europe there are currently 8,000 financial institutions ( 9,500 ten years ago ) , the number of which is to be cut because they are considered too high, the feast is guaranteed - particularly those which ensures faster than rivals internal information.

After all , knowledge is power - especially when betting on the profits of which are huge. At this point , of course, especially in Europe , the dominance of Goldman Sachs is undeniable - after two strains that are located in the administration of the ECB (M.Draghi, M.Carney).

Concluding , these developments are very important for depositors - because if any bank goes bankrupt who have their savings, they will be the big losers .

This is evidenced today by the bankruptcy of Detroit - where the two major banks, which have lent (Bank of America, UBS), enjoyed the status of "preferred creditor ". Simply, be the first to receive money from the liquidation of the bankruptcy estate - earlier even pension funds.
from analyst.gr