Posts by "catnip"

Bank run ahead...
April 27 (Bloomberg) -- Greeces banks may run out of the collateral used to get funding from the European Central Bank as Greek sovereign debt falls in value, according to Citigroup Inc. Chief Economist Willem Buiter.

Greek banks probably get most of their short-term funding from the ECB, using mainly Greek sovereign debt as collateral, Buiter wrote in a report yesterday. When the value of the state debt falls in the secondary market, the decline in the mark-to- market value of the collateral may trigger margin calls -- or demands for more collateral, Buiter said.

Eventually the Greek banks could run out of additional collateral acceptable to the ECB/Eurosystem, Citigroup said. Their funding needs are likely to be exacerbated by a withdrawal of deposits that could become a run.

Greeces economic crisis has raised funding costs for Greek banks and forced them to borrow from the ECB rather than in the market. The ECB said on March 25 that it would extend emergency lending rules, adding that Greek bonds wont be cut off from ECB refinancing operations next year. The bank had been scheduled to reintroduce pre-crisis rules at the end of 2010, which sparked concerns over the Greek banks abilities to raise funding.

National Bank of Greece SA, EFG Eurobank Ergasias SA, Alpha Bank SA and Piraeus Bank SA, Greeces largest lenders, have been the worst-performing stocks in the 52-member Bloomberg Europe Banks and Financial Services Index this year, led by National Banks 42 percent decline and a 37 percent drop in Piraeus.

Greek Banks Slide

National Bank fell 5.6 percent to 10.49 euros as of 1:58 p.m. in Athens trading today. Eurobank lost 5.7 percent to 5.11 euros, Alpha slid 6.2 percent to 5.65 euros and Piraeus sank 6.4 percent to 5.09 euros.

If Greeces lenders run out of collateral and suffer an outflow of deposits, the ECB would have to reduce the minimum quality threshold on securities acceptable as collateral, currently BBB- or the equivalent, or refuse to lend to the Greek banks, Citigroups Buiter said. That would spark a funding crisis and possible bank failures, he said.

Greek Prime Minister George Papandreou triggered his countrys 45 billion-euro ($60 billion) bailout from the European Union and the International Monetary Fund on April 23 after failing to convince investors that the state could pare a surging budget deficit, which stood at 13.6 percent last year.

Earnings Outlook

Earnings at National Bank, the countrys largest lender, Eurobank, Alpha and Piraeus may suffer this year as government measures aimed at slashing the fiscal deficit curb loan demand and drive up defaults. National Bank and Piraeus posted net losses in the fourth quarter after loan losses rose. Local bank deposits fell 3.6 percent in the first two months of 2010.

Although a banking crisis would not trigger a sovereign default in any mechanical way, it could increase the reluctance of the markets to fund the sovereign and may precipitate a sudden stop, which would leave the sovereign wholly dependent on funding from the IMF and the other Euro area member governments, Citigroup said. The ECB/Eurosystem could end up with large mark-to-market losses on its loan portfolio.

European banks are seriously exposed to Greek risk and had total exposure of $193.1 billion at the end of December. French lenders have the biggest claims on the Mediterranean country, at $78.8 billion, followed by German banks with $45 billion and British lenders with $15.4 billion, Citigroup said, citing data from the Bank for International Settlements.

It seems they slowly get their lesson. Trichet stated , cutting Merkel short, the aid package will be ready right in time, period. After that statement EUR continuously rises vs most majors including GBP.
I have opened a long position EUR/GBP I think EUR/USD will cross 1.34 in Japan FX .... I think if the markets cannot trust Trichet then EUR will be sold off very hard. The Eurozone cannot afford a small talker as ECB president. And I don't believe Trichet is going to cheat the markets this was Merkel's well done job. I am confident EUR/USD will reach beyond 1.36 there is after Trcihet's promise no way back.

Well Greece needs to attend some kind of institution for retarded children ... head of teaching Merkel
also head of PTA says your lessons are not done... btw Germany spends more per capita for overpaid civil servants than greece ever did...

April 26 (Bloomberg) -- German Chancellor Angela Merkel said she wont release funds for a Greek rescue until the country shows its got a sustainable plan to cut its budget deficit and a final decision may be in a few days.

Greek bonds plunged today as Germany delays approval of a $60 billion rescue plan that would be co-financed by the euro region and the International Monetary Fund. The extra yield that investors demand to hold Greek 10-year debt over German bunds rose 65 basis points to 625 basis points.

Merkel, speaking to reporters in Berlin, said there would be no decision on aid for Greece until the International Monetary Fund works out a plan of cuts with Greek government. She said Germany would assist Greece only after it agrees to take tough measures for the next several years.

Don't know what's going on the EU/IMF. Took 100 pips profit from long and went short @ 1.335
GBP shows strength vs USD. That contradicts supposed influence of elections I think. Nothing has changed.

As FX trader I hate nothing more then politics getting in. Those guys state x and ten minutes later another guy states what was meant with x was actually not-x.