Monday, 25 March 2013


Eurogroup’s Dijsselbloem Says "Banks Should Save Themselves"

Tyler Durden's picture




The by-now infamous Dutch FinMin Jeroen Dijsselblom - and head of the Eurogroup of finance chiefs - made some fascinating comments this morning with Reuters and the FT that are changing the shape of European markets rapidly. From banks need to save themselves to forcing "all financial institutions, as well as investors, to think about the risks they are taking on because they will now have to realize that it may also hurt them," he is making a lot of sense - though we suspect Mr. Draghi will not be amused as his 'promise' looks like being tested. Simply put, Dijsselblom is saying that a balance sheet can be 'normalized' not only by boosting assets (courtesy of the ECB) but by collapsing liabilities (or remarking bad loans to market) - something that no one in power has admitted to date. While this is upsetting to markets - so used to the visible hand of central planning saving themfrom themselves - this is very positive step for 'real people' as taxpayers appear to be 'off the hook' and theresponsible parties beginning to be punished.
Via Bloomberg:
Dijsselblom's direct quotations in the interview were confirmed by his spokeswoman, Simone Boitelle.
• “What we’ve done last night is what I call pushing back the risks,” Dijsselbloem says in the interview

• “If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalize yourself?’. If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders,” he says

• “If we want to have a healthy, sound financial sector, the only way is to say, ‘Look, there where you take on the risks, you must deal with them, and if you can’t deal with them, then you shouldn’t have taken them on,’” he says

• “The consequences may be that it’s the end of story, and that is an approach that I think, now that we are out of the heat of the crisis, we should take,” he says

• “It means deal with it before you get in trouble. Strengthen your banks, fix your balance sheets and realise that if a bank gets in trouble, the response will no longer automatically be that we’ll come and take away your problem. We’re going to push them back. That’s the first response we need. Push them back. You deal with them,” he says

• “We should aim at a situation where we will never need to even consider direct recapitalization,” he says

• “If we have even more instruments in terms of bail-in and how far we can go on bail-in, the need for direct recap will become smaller and smaller,” he says

• “I think the approach needs to be, let’s deal with the banks within the banks first, before looking at public money or any other instrument coming from the public side. Banks should basically be able to save themselves, or at least restructure or recapitalise themselves as far as possible,” he says

• “Now we’re going down the bail-in track and I’m pretty confident that the markets will see this as a sensible, very concentrated and direct approach instead of a more general approach,” he says

• “It will force all financial institutions, as well as investors, to think about the risks they are taking on because they will now have to realise that it may also hurt them. The risks might come towards them,” he says
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Mon, 03/25/2013 - 12:07 | 3372564l1b3rty
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Jeff Berwick launching his first Bitcoin ATM in Cyprus? Then IRAN?

Mon, 03/25/2013 - 12:11 | 3372585redpill
redpill's picture
Save yourself (as long as you are small enough and not based in one of the major European economies, in which case the tax payers will bail you out)!
Mon, 03/25/2013 - 12:13 | 3372592idea_hamster
idea_hamster's picture
So he says banks should "go [save] themselves", huh?
Well, I guess this explains what the ECB has always meant when they said, "Relax -- we're here to [save] you!"
Good to know the lexicon....
Mon, 03/25/2013 - 12:16 | 3372625aint no fortuna...
aint no fortunate son's picture
His talk will go over like a fart in church - hope he has some bodyguards because he is damn sure pissing off TPTB
Mon, 03/25/2013 - 12:37 | 3372755LooseLee
LooseLee's picture
Fuck TPTB and the ass they rode in on. Off with their heads and anyone who 'supports' them---Ben Bernanke and his cronies surely included...
Mon, 03/25/2013 - 13:04 | 3372906flacon
flacon's picture
MONEY should save itself. 
Too bad that is a mathematical impossibility when money is debt. 
Mon, 03/25/2013 - 12:39 | 3372769Alea Iactaest
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<--- This statement was approved by the Troika
<--- He went off the reservation
D-Boom sounds reasonable, at first blush. It's what makes sense: equity, debt and uninsured "savers" get whacked. In context of recent events, however, this sounds kind of evil. Just setting the table for the main course, as it were.
In this context, capital controls make perfect sense to preserve The Bank to the benefit of all.
Mon, 03/25/2013 - 12:18 | 3372635redpill
redpill's picture
The ONLY reason Cyprus happened as it did was due to the size of the banking sector relative to the GDP and population size.  In a large economy they would have nationalized the banks and put the losses on the backs of the taxpayers.  That they are pretending this is some advocacy to protect taxpayers is a fucking joke.  The reality is that they could have stolen every single penny from the Cypriot people and it wouldn't have made a dent in the problem, therefore they had to do something else.
Mon, 03/25/2013 - 12:53 | 3372835GCT
GCT's picture
+1 Redpill. 
I honestly do not get his remarks.  My understanding is the central banks buy the government debt so how will they solve the problem as long as they continue to buy soverign debt?  I am all for letting the banks fail if they fucked it up but not failing because central government screwed the bank. 
There is no way to cover this. Am I looking at this wrong?
Mon, 03/25/2013 - 13:12 | 3372940Ropingdown
Ropingdown's picture
There's a lot to be said, though, for scaring large depositors into German, French, and Dutch banks.  Look out, Luxembourg.
Mon, 03/25/2013 - 13:22 | 3372996imapopulistnow
imapopulistnow's picture
[save] or [fu(k]?
Mon, 03/25/2013 - 12:22 | 3372670asteroids
asteroids's picture
All right, call this clown on the carpet TODAY. Let's mark every asset and bond "mark to market" TODAY. Let's see how many banks and funds implode overnight.
Mon, 03/25/2013 - 12:36 | 3372746yrbmegr
yrbmegr's picture
What if there is no market for an "asset"?  I suspect the big banks have substantial holdings of unique "assets" for which the market is inestimable.
Mon, 03/25/2013 - 13:23 | 3373002viahj
viahj's picture
no reservation e-bay auctions?
Mon, 03/25/2013 - 13:08 | 3372921Ropingdown
Ropingdown's picture
It seems to me most banks can handle a lot of markdowns before they run through equity and the bondholders.  What is left is less frightening to the uninsured depositors...if there are any.
Mon, 03/25/2013 - 13:46 | 3373154SDShack
SDShack's picture
"Save yourself" means when we can't steal anymore, we are going to cannibalize the banks. Bankers are cannibals by nature. The TBTF's decide who will fail to feed them. See Bear Stearns. See Lehman. See Laiki.
Mon, 03/25/2013 - 14:02 | 3373262Imminent Crucible
Imminent Crucible's picture
I’m pretty confident that the markets will see this as a sensible approach,” he says
Uh, not looking good so far, Dieselboom. The EUR/RUB is getting hammered as Russian 'garks find ways to turn their euros back into Putin bucks. Stock markets--they hate it.  This is the end of banking as we've known it. It's just a question of how long before the message "All your savings are belong to us" sinks in around the world.

Mon, 03/25/2013 - 12:30 | 3372713Timmay
Timmay's picture
Allow me to translate: If you want to keep depositor's money in your banks, raise interest rates or risk capital flight.
Mon, 03/25/2013 - 13:03 | 3372895NoCrazies
NoCrazies's picture
Allow me to translate: If you take depositors money to make risky bets that explode in your stupid face; we are going to liquidate the bank assets, fuck the investors (who deserve what they get- they took the risk)liquidate any depositor we can claim is uninsured....... then he is left hannging on insured depositors. They sure were not claiming that insured depositors should not get a haircut, only after the globe yelled "holy Shit" did they back off of depositors insured up to 100K. I am fine right up to the point that they were willing to allow the Cyprus government to steal insured deposits.
Mon, 03/25/2013 - 12:08 | 3372565Capitalist
Capitalist's picture
Depositor money or taxpayer money? At least with depositor money there's no moral hazard.... D-Boom might be on to something.
Mon, 03/25/2013 - 12:13 | 3372606Ratscam
Ratscam's picture
no more Too Big To Fail? I,m confused.....
Mon, 03/25/2013 - 12:39 | 3372764MachoMan
MachoMan's picture
I wish it was that simple...  the sad part is that with government/central bank meddling in the worldwide economy, those "deposits" cannot be practically separated from moral hazard.  Those deposits invariably contain tax money...  along with a myriad of other things, the source of which is all the same.
Mon, 03/25/2013 - 13:06 | 3372908Ropingdown
Ropingdown's picture
Now it's clear to me how Bernanke plans to sell off his hoard of Treasuries.  "You got some big deposits you're worried about?"
Mon, 03/25/2013 - 12:08 | 3372568knukles
knukles's picture
Who the fuck is in charge, here?
Mon, 03/25/2013 - 12:12 | 3372597Legolas
Legolas's picture
T R O I K A 
Mon, 03/25/2013 - 12:13 | 3372611magpie
magpie's picture
I agree, the intermediate bottom will only be reached when Draghi says something.
Mon, 03/25/2013 - 13:01 | 3372884Anonymous peon
Anonymous peon's picture
Nobody. It's a financial wildfire and it's going to have to burn its self out.
Mon, 03/25/2013 - 12:09 | 3372576McMolotov
McMolotov's picture
Sonic Diesel-Boom.
Mon, 03/25/2013 - 12:10 | 3372580medium giraffe
medium giraffe's picture
Fuck the banks, save the people! 
Mon, 03/25/2013 - 12:11 | 3372581Bay of Pigs
Bay of Pigs's picture
Save themselves? Like the drowning man catching the anvil?
Mon, 03/25/2013 - 13:04 | 3372900Ropingdown
Ropingdown's picture
Most of these drowning men should have grabbed an anvil before they hit the water.  That makes for a swifter and less painful death. (The cannonball grab in Master and Commander provides a nice image...Citi Board grabs one and ....)
Mon, 03/25/2013 - 12:11 | 3372584Mordenkainen
Mordenkainen's picture
If only Hank Paulson had said this (and meant it) in '08, things would be quite different right now.
Mon, 03/25/2013 - 12:17 | 3372630Stock Tips Inve...
Stock Tips Investment's picture
I think from now, the solution to the problems of the banks go through that bankers, investors and large deposit holders carry part of the responsibility. If this happens, the bankers think twice before taking risks. We may be seeing the beginning of a change in the solution of financial problems.
Mon, 03/25/2013 - 12:41 | 3372774LooseLee
LooseLee's picture
That corrupt POS didn't (and still doesn't) have the integrity or character to say such a thing.  Like most in Washington and on Wall St., he has no soul and hides behind the veil of power. When the people 'wake up', he will not be able to escape the carnage.
Mon, 03/25/2013 - 13:20 | 3372982Mad Mohel
Mad Mohel's picture
The people aren't waking up......ever! This is going to go on for a long time. The sheep today are content watching reality TV and guzzling down McPuke.
Mon, 03/25/2013 - 12:11 | 3372588Legolas
Legolas's picture
Did we just hit the iceberg?  I think so.
Mon, 03/25/2013 - 12:26 | 3372689McMolotov
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'Tis but a scratch, and the band is still playing, so all is well.
Mon, 03/25/2013 - 12:29 | 3372705stant
stant's picture
no, not just hit it ,more like backed up and hit again.
Mon, 03/25/2013 - 14:03 | 3373281Dr. Kananga
Dr. Kananga's picture
"Attention citizens of Cyprus--may I have your attention please. In an attempt to promote stability and confidence in the financial sector, the currency formerly known as the Euro has been replaced by the new and improved Klepto. Do not be alarmed..."
Mon, 03/25/2013 - 12:11 | 3372591icanhasbailout
icanhasbailout's picture
Sounds like he finally got the translations of the Ron Paul speeches that he requested.
Mon, 03/25/2013 - 12:12 | 3372596Byte Me
Byte Me's picture
I gather Dijselflower is NOT a Goldmanite??
Mon, 03/25/2013 - 12:16 | 3372626knukles
knukles's picture
Ain't it amazing.
Bunch a low life politicians and petty bureaucrats trying to act like high financiers and look what happens
Holy shit.....
And the Democrats were worried about Palin
At least Palin could open her mailbox...
Mon, 03/25/2013 - 12:19 | 3372654Byte Me
Byte Me's picture
Beginning to look like a faction fight y'think?
Mon, 03/25/2013 - 13:00 | 3372881Ropingdown
Ropingdown's picture
One faction's held all the cards for several years.  They've just been afraid to play them.  They got pushed too far.  Now they get their moment to prove what they said last year: "Bring down your risk, manage your banks and spending, or else we'll choose to either A. Squeeze you out of the euro zone or B. If you openly rebel, we'll just leave.  I'm interested in what the French reaction will be when the next set of  bank liquidations begins. 
Mon, 03/25/2013 - 12:27 | 3372693McMolotov
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Is "open her mailbox" a euphemism?
Mon, 03/25/2013 - 12:18 | 3372640eclectic syncretist
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it certainly doesn't sound like it.  The euro's dropping like a little bitch, but silver and oil seem to like what he has to say. 
Last one out turn off the lights.
Mon, 03/25/2013 - 12:28 | 3372699slightlyskeptical
slightlyskeptical's picture
I think this is the wrong reaction. Basically the ECB is saying they won't be running to rescue anyone, thus not throwing good money after bad. It should serve to strengthen the Euro.
The ECB is also making the US and Japan look like idiots with their free money policy.
Mon, 03/25/2013 - 12:51 | 3372829MachoMan
MachoMan's picture
It's easy to do with a country that is a pimple on the ass of the euro...  it's like some county in BFE U.S. going bankrupt...  "see, we're like totally sincere about this n'stuff"
Mon, 03/25/2013 - 13:17 | 3372969Acet
Acet's picture
Not really.
If you think as a (short-termist) investor, then the best place to park your money is the one where financials and the markets are being proped-up by sucking the money away from everybody else.
Thus if the Eurozone is not willing to further impoverish taxpayers to prop-up banks and markets, then it becomes a bad place for the fleet-footed short-term capital.
For those whose investment horizons are measured in decades it's the reverse, but there are very few of those around in the modern financial system (even pension money is moved around a lot by money managers to increase churn and comissions).