Friday, 16 September 2011

...................................................................................................

It was noted in a WSJ article that the swap lines have been underutilized as European banks were using private deals to borrow DOLLARS by pledging DOLLAR ASSETS to U.S. banks

http://yrah53.wordpress.com/2011/09/15/swaplines/

US banks privately lending billions to support European lenders

US banks have become the unlikely saviours of their ailing European counterparts, signing private agreements to lend them billions of dollars in recent weeks after an exodus of nervous money market funds left many without ready access to short-term funding.
snip

“Doing repo means you don’t have to sell and don’t have to take the loss on many of these assets upfront,” said another banker at a US bank, who has signed off on such deals in recent weeks. “You can do it privately, so nobody needs to know, and spread losses over the lifetime of the assets.”

Repo desks are the financial market equivalent of pawnshops, allowing clients to generate cash for assets sitting on their balance sheets. Given that loans are secured against collateral, they are seen by lenders as less risky than other forms of lending, either private or through bond issues.

According to bankers at the US firms involved, which include at least three of the five biggest US banks, the liquidity squeeze for European banks has come at a time when US firms are flush with cash.

Investors have been flooding US lenders with cash in recent months, prompting some to charge clients for deposit taking, and repo lending is seen as a sensible – and profitable – way to use that cash. One banker said bosses had increased available funds for repo lending in recent weeks.
http://www.ifre.com/us-banks-privately-lending-billions-to-support-european-lenders/1606560.article


Some politicians in Europe air the view that an "orderly" Greek debt default should be discussed, but history suggests it would be a very messy affair unless euro zone leaders agree to make preparations and ring-fence the banks
http://www.reuters.com/article/2011/09/15/us-eurozone-default-history-idUSTRE78E44X20110915

Greek Day of Reckoning Looms in Ponzi Europe: Mario I. Blejer
By Mario I. Blejer
May 30 2011

http://www.bloomberg.com/news/2011-05-30/greek-day-of-reckoning-looms-in-ponzi-europe-mario-i-blejer.html

Greece Should 'Default Big' to Address Debt Crisis, Blejer Says
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/09/12/bloomberg1376-LRGRHQ0UQVI901-176NQEP2TJ0PQI8DN436B1HNLR.DTL

http://www.advisorone.com/2011/09/14/greece-urged-to-walk-away-from-debt

Sickly European economies and their capital-starved banks can forget the prospect of quickly receiving significant special help from reserves-rich Russia.

The country's finance ministry, its biggest bank, and some experienced Russia investors all gave the idea the thumbs down at the Reuters Russia Investment Summit.

http://www.reuters.com/article/2011/09/15/us-russia-summit-proforma-idUSTRE78B5DQ20110915

European Central Bank President Jean-Claude Trichet pressed euro-area governments to take decisive action to halt the debt crisis, after the ECB bought them more time by extending an emergency lifeline to lenders.
Trichet said finance ministers meeting in Wroclaw, Poland today need to show the same “unity of purpose” as central banks did yesterday in providing extra dollars to European banks bruised by the crisis that has seeped from Europe’s edges to its core.
“We are not back to ‘business as usual’ as some thought some months ago,” Trichet said late yesterday in Wroclaw. “We call all authorities to implement swiftly all decisions and to be constantly ahead of the curve.”
Eighteen months of crisis-fighting and 256 billion euros ($355 billion) in aid for Greece, Ireland and Portugal have failed to stabilize markets. The turmoil has spread to Italy and Spain, sending tremors through Europe’s banking system and leading to speculation that a currency meant to be permanent might break up.
European finance ministers are also braced for a dressing- down from U.S. Treasury Secretary Timothy Geithner, attending his first euro-crisis meeting at the invitation of the host Polish government, a country still using its own currency.
The stewards of the 9.5 trillion-euro economy must “do more to earn the confidence of the world, that they have the political will to do this,” Geithner said on Sept. 14.
http://www.bloomberg.com/news/2011-09-15/trichet-urges-euro-officials-to-get-ahead-of-curve-in-crisis.html

Some banks are finding it hard to obtain dollar funding for periods of longer than a few days as US money market funds and other traditional dollar lenders become increasingly nervous about the threat of a Greek debt default, which could destabilize markets throughout the region. European bank stocks have lost a third of their value since July

snip

Bank of France Governor Christian Noyer said this year's three-month dollar operations would buy European banks time as they adjusted their dollar business, which he said was necessary because US money market funds were "withdrawing from Europe."

"All European banks, and the French are no exception, will have to readjust their activity in dollars," Noyer told France's Les Echos newspaper. "They must shrink their balance sheet without at the same time hurting their core businesses, such as export loans."
http://zeenews.india.com/business/news/news_content.aspx?newscatid=5&newsid=30490

Euro Jumps After ECB Floods Banks With Dollars

Speculation has percolated for weeks that European banks' exposure to Greece--which by some estimates exceeds EUR90 billion--was leading to a shortage of dollars that forced them to sell euros to fund their operations.
Although a long-term solution to Greece's financial ailment is not yet at hand, investors interpreted the ECB's move as a sign that officials were moving more assertively to contain fallout from the crisis.
http://online.wsj.com/article/BT-CO-20110915-715296.html


Posted by Britannia Radio at 08:13