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By the look of things, Europe’s banking system
is breaking down again.
Bankia’s shareholders have received a nasty new year’s surprise. They
may lose most of their investments or even all of them says
the Spanish bank rescue fund in its latest report.
According to
FROB, the Fund for Orderly Bank Restructuring, Bankia has a negative value of 4.2 billion euros, and its parent
group BFA is 10.4 bn in the red.
Valuation is key in the recapitalisation of
Spain’s banking system, weighed down by massive bad loans accumulated
in a property bubble that burst in 2008. Bankia/BFA
is set to receive 18 bn euros of European aid, and
become the country’s biggest bailout recipient.
http://www.euronews.com/2012/12/27/bankia-worthless-says-new-report/
Greece’s four largest banks need to boost their capital by 27.5
billion euros ($36.3 billion) after taking losses from the
country’s debt swap earlier this year, the largest sovereign
restructuring in history.
National Bank
of Greece SA, the country’s biggest lender, needs to raise 9.8 billion
euros, according to an e-mailed report by the Athens-based Bank of Greece
(TELL) today. Eurobank Ergasias
SA (EUROB) needs 5.8 billion euros, Alpha Bank (ALPHA) needs 4.6 billion
euros and Piraeus Bank SA (TPEIR) needs 7.3 billion euros, according to the
report. Total recapitalization needs
for the country’s banking sector amount to 40.5 billion euros, the
report said.
http://www.bloomberg.com/news/2012-12-27/greek-bank-capital-needs-at-eu27-5-billion-bank-of-greece-says.html
The above articles tell us point blank that
Europe’s banking crisis is neither fixed nor even close to over.
Consider the article on Spain.
A little known fact about the Spanish crisis is that
when the Spanish Government merges troubled banks, it typically swaps out
depositors’ savings for shares
in the new bank.
So… when the newly formed bank goes bust,
“poof” your savings are GONE. Not gone as in some Spanish version
of the FDIC will eventually get you your money, but gone as in gone forever.
This is why Bankia’s
collapse is so significant: in one move, former depositors at seven banks
just lost virtually everything.
In the case of Greece, the above article needs some
perspective. Sure, €27.5 billion sounds like a lot of money, but just
how big is it relative to Greece’s banks.
The entire capital base of the Greek banking system
is only €22 billion.
By saying that Greek banks need €27.5 billion
Greece is essentially admitting that is needs to recapitalize its entire
banking system. Also, you should know that Greek banks are still sitting on €46.8 billion
in bad loans.
There is a word for a banking system with a capital
base of €22 billion and bad loans of €46.8. It’s INSOLVENT.
Take note, the EU Crisis is anything but over. The
ECB may have pushed it back by a year by promising unlimited bond
buying… but that relief rally is coming to an end.
With that in mind, smart investors are taking
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coming.
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What Europe’s Crisis Means For You and Your
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How to Protect Yourself From Inflation
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Best
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