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While the latest
woes around Godman Sachs' alleged malversations against its own clients
overshadow the financial world like the Icelandic ash cloud above Europe,
latest ECB data are a strong indication that the Eurozone's troubled banks
will grab the headlines again.
The April
monthly bulletin of the ECB contains a
graph that shows a huge Klumpenrisiko (bulk risk) in the Eurozone banking
sector: Only 3 large ailing banks have been on the receiving end of almost
half of all government money infusions between 2008 and 2010.
GRAPH: Just
3 large banks have not only received 46% of all Eurozone capital injections
but also 36% of all capital guarantees and 52% of asset protection funds. Source:
ECB
3
Largest Banks Account for Up to 9% of Eurozone Banking Assets
In absolute figures this translates into €32.5 billion in capital
injections, €150.9 billion in liability guarantees and €21
billion in asset protection funds.
A comparison with other Western finance regions shows that Eurozone banks
have absorbed the biggest liquidity infusions in comparison with their
British and US counterparts.
GRAPH:
Eurozone members have still a comfortable cushion of non-used liability
guarantees after sucking up 54% of the volume of indicated capital
injections. However, absolute figures show that the USA has so far taken the
most money into hand for bailouts with total outlays of €627.7 billion.
Source: ECB
The ECB comments
these sets of data with these words:
The total
commitment is the sum of the commitments under national schemes, across the
three categories (or the actual amount spent in the absence of explicit
commitments), plus the actual amounts spent outside national schemes.
Regarding the
implementation of the measures, some conclusions can be drawn. Although there
are differences across the different measures and regions, the amounts
involved are significant in the euro area, the United Kingdom and the United
States. It should also be noted that there are also significant differences
across euro area countries (not shown in the table). Chart 1 shows the
percentages of the overall amounts committed under national schemes that have
actually been extended. The take-up rate is generally low across all
measures, but there are substantial variations: the use of recapitalisation
measures has been relatively widespread, while the issuance of bank bonds
with government guarantees has been considerably lower. It should be noted
that the committed volume and use of liability guarantees, in absolute terms,
are far higher than the committed volume and use of capital injections.
Furthermore, the
bulk of the financial support has been targeted at a relatively small number
of institutions (see Chart 2). Indeed, in the euro area about half of the
extended support has been absorbed by the three largest recipient
institutions.12 In the case of each individual support measure, the three
largest recipients account for 6-9% of total euro area banking assets.
Greece
is a problem not yet solved while speculators begin to focus on Portugal,
which rejected assertions its state of debts are as crippling as those of
Greece, pointing to a far lower public debt: GDP ratio of 86% vs. 124% for
Greece based on data from the EU Commission.
But Portugal's Achilles heel may look rather
more than that of Spain: In both countries consumer debts have risen to unsustainable
levels, with Portugal taking a lead with 239% consumber debt:GDP ratio. Total
Portuguese debt levels have now climbed above 300% or equal to the US total
debt level in the Great Depression, when this ratio topped out at 300% in 1933.
Toni Straka
Editor, the Prudent Investor
Toni Straka is an
INDEPENDENT Certified Financial Analyst (OeVFA, EFFAS) who worked as a financial
journalist for 15+ years and now evaluates global market trends. Analyzing
financial and political news permanently he wants to share his insight with
those who understand that we are in an era of global redistribution of
wealth. The US-European centric approach does not work anymore. Five billion
people in the developing countries now demand their fair share of the world's
resources.
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