For the past two months I have been releasing heretofore unseen documentation, proof-backed allegations and logical assertions throwing light on what I view to be gross misrepresentations, attempts at financial reporting prestidigitation and what I consider to be outright fraud in the Irish and UK banking system. BoomBustBlog has been the only source of such information and except for a few outliers, the MSM has literally refused to run stories on this. 

Alas, even though mainstream editors, producers and reporters are trying to ignore what the BoomBust has done, massive shock waves have shaken loose those at the very top of the power structure. Unfortunately, much of what is going down is beyond the ken of the hoi polloi due to the taboo nature of the most important message that I convey. 

Remember what happened when I initially dropped the Irish bomb on the unsuspecting Irish public? The head of the Irish Central Bank Regulatory Authority unexpectantly resigned...

reggie middleton on irish banks

So, what happens when you bring the Fiery Sword of Economic Truth to the UK and Ireland???

Here's the answer to that question in the form of another surprise (not) to all BoomBustBloggers. After my multiple expose's on RBS...

  1. I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets!
  2. Who is RBS? Royal BS... or the Royal Bank of Scotland
  3. Taxation Without Representation: UK Taxpayers Schooled on What US Students Are Taught In 3rd Grade

We see Reuters reporting: RBS shares slump after shock ousting of CEO Hester. Surprise! Surprise!

 Royal Bank of Scotland shares fell seven percent on Thursday after the surprise ousting of CEO Stephen Hester left investors questioning who would steer the part-nationalized bank through to an eventual privatization.

Isn't this just one helluva string of coincidences that as I uncover dirt and grime, we get these "unexpected" and "unforeseen" ousters and resignations days and weeks afterward. If I didn't know better, I'd think someone busted these guys doing something naughty... Nahh! Couldn't be!

I know more than a couple of UK taxpayers who'd much not rather pay Irish bad debts. I decided to rub a little salt in the UK wound by throwing some arithmetic illumination on the situation via an embedded Irish bad bank tax calculator...

The app below allows the UK Taxpayer to calculate for themselves exactly what their individual contribution (pro rata) is to the government bailout of RBS.

I've taken the liberty of pre-populating the input fields for you, but if you don't agree with the numbers then by all means insert your own!

Then there's still that Cyprus'd thingy... 

While the inclusion of large savers in future bank bailouts is now widely accepted, significant differences still remain between member states.

While the new rules governing bank resolution were first intended to come into place in 2018, since the Cypriot bailout there have been calls from senior EU figures such as European Central Bank president Mario Draghi and EU economics affairs commissioner Olli Rehn to introduce the new regime as early as 2015.

The Irish presidency of the European Council is hoping to reach a common position by the end of next month.

The little app below calculates what return you should expect to receive to take on the risk of a potential 40% haircut. The second tab offers what recent Cyprus bank rates were. Do you see a disparity???

Other hard hitting pieces on the resurgent EU banking crisis

 

Published in BoomBustBlog
Wednesday, 12 June 2013 04:35

Apple Bonds Proven To Have A Nasty Taste

bite money

The Financial Times reports Apple bonds lose 9% in six weeks:

Investors are nursing losses of up to 9 per cent on Apple’s record-breaking $17bn bond offering, less than six weeks after the securities landed in their portfolios.

The technology giant tapped the white-hot bond market for the largest debt fundraising to date on April 30, but a sharp turn in interest rates has caused a sell-off in corporate bonds and wiped hundreds of millions of dollars off the value of the offering.

Apple sold $3bn of bonds maturing in 2043, locking in a low interest rate of 3.9 per cent for the next 30 years, but the market price of these bonds had fallen to 90.36 per cent of face value in late trading on Monday, according to Trace data.

Investors in the offering paid 99.418 per cent of face value for the new bonds, but institutional and retail demand was so high that they traded as high as 101.97 in the secondary market.

 

The debt sale was one of the most frenzied on Wall Street for many years and there were three times as many orders as there were bonds available. Issues by companies with high credit ratings have been among the hottest fixed-income investments because the interest they provide outstrips the meagre yield available on government securities.

Hmmm.. So-called "investors" need to look to the future, not the present, when deploying their capital. These so-called "investors" are definitely not subscribers to BoomBustBlogLast month I posed the query, "Is It Time To Buy Apple As A Valuation Play? The Contrarian That Called The Top In Apple Weighs In". After all, it had fallen over 40% from its recent all time high, a fall which I clearly told subscribers would come. This question is quite pertinent, both for Apple's long term viability and its short to medium term investors. Case in point, Apple's (rather astute) management saw it fit to lock in 3.9% 30 year funding rates. Kudos! A very smart move... For them! The buyers of these bonds (an offering that was 3x oversubscribed, may I add) obviously did not subscribe to BoomBustBlog. Let's count the reasons why such an offering was both ill timed, and ill priced.

The Apple Profit Engine Has Stalled & Is Rolling Downhill

Apple is facing a shart decline in the margins of its top two value drivers. May I also add that these two value drivers are 83% of Apple's revenues and an even greater portion of its profits. Such a drastic concentration in only two products who have reached their zenith is not a good thing!

Click the graphic once to view, twice to enlarge to printer quality...

Reggie Middletonss Ultimate Apple Value Infographic

Apple's Competition Is The Greatest It Has EVER Been!

Apple's competition is the greatest it has ever been, and features companies who are literally at the top of their game. We are talking a lot of companies, and at the top of a very difficiult game as well. Reference What Sell Side Wall Street Doesn't Understand About Apple - It's Not The Leader Of The Post PC World!!!

Apple is Materially & Quickly Losing Global Market Share! Clear Indicators Of Permanent Downward Moves In Its Peer Group

Apple is rapidly losing global market share over and the trend is worsening. This has ALWAYS signaled the beginning of the end for its peers. Reference Is Tim Cook Cooked? Market Share vs Profit Margin, part 2 - Follow What I Do, Not What I Say!

We Clearly & Obviously Ending A 3 Decade Bull Market, Likely At The Tail End Of The Largest Global ZIRP Experiment Ever!

And this final aspect is the kicker. We are likely culminating the end of a three decade secular bull market in bonds. Why in the world would anyone want to buy debt now, in a good, bad or mediocore company? Reference a chart of ten year rates over time, and you will see that once you get this close to zero (and the applied end to excessive ZIRP), there's no way to go but up. As excerpted from the Market Realist site:

For those who don't subscribe and/or haven't already seen it, here is the video that tells (nearly) all about Apple, from beginning (Q3 2010) to end.

Of course, there is a point at which Apple is a good buy. After all, they have a lot going for them. The question du jour is, exactly what is that point? I refer my subscribers to the research documents below for the answers... 

Subscribers, download the Q3 2013 valuation reports (click here to subscribe).

The update from two months ago is also of value for those who haven't read it. It turns out that it was quite prescient!

Published in BoomBustBlog

Last month I posted updates of my search and studies of distressed European assets stemming from the banking crisis to be had at prime risk adjusted returns, see Preparing Resources To Shop For Distressed Assets As Banks Refuse To Come Clean On Near Fraudulent Reporting  and Which Banks Are We Looking At To Shop For Assets?. Well, a month later, the Economist economist jumps into the fray with the article "Till default do us part, A half-hearted banking union raises more risks than it solves". To wit:

Almost a year ago, as the euro crisis raged, Europe’s leaders boldly pledged a union to break the dangerous link between indebted governments and ailing banking systems, where the troubles of one threatened to pull down the other. Yet the agreement that seems likely to emerge from a summit later this month will be one that does little to weaken this vicious link. If anything it may increase risks to stability instead of reducing them.

Almost everyone involved agrees that in theory a banking union ought to have three legs. The first is a single supervisor to write common rules and to enforce them uniformly. Next are the powers to “resolve” failed banks, which is a polite term for deciding who takes a hit; these powers also require a pot of money (or at least a promise to pay) to clean up the mess left by bust lenders and to inject capital into those that can get back on their feet. The third leg is a credible euro-wide guarantee on deposits to reassure savers that a euro in an Italian or Spanish bank is just as safe as one in a German or Dutch bank. National insurance schemes offer scant reassurance to savers when sovereigns are wobbly and insured deposits make up a big chunk of annual GDP (see chart).


The logic behind this chart has been the engine behind out contagion model, the core thesis behind the short on continental Europe in general (see Overbanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe) and our hypothesis against the French banks - reference "On Your Mark, Get Set, Bank Run".

There's much more to this bank run, capital flight thingy in Europe. I explained it in detail over two years ago:

First, the European banks are just too big in relation to Europe, herself!

Sovereign Risk Alpha: The Banks Are Bigger Than Many of the Sovereigns

image015.png

Second, as stated in the Economist, we have a liquidity time bomb! 

As excerpted from our professional series File Icon Bank Run Liquidity Candidate Forensic Opinion:

BNP_Paribus_First_Thoughts_4_Page_01BNP_Paribus_First_Thoughts_4_Page_01BNP_Paribus_First_Thoughts_4_Page_01

This is how that document started off. Even if we were to disregard BNP's most serious liquidity and ALM mismatch issues, we still need to address the topic above. Now, if you were to employ the free BNP bank run models that I made available in the post "The BoomBustBlog BNP Paribas "Run On The Bank" Model Available for Download"" (click the link to download your own copy of the bank run model, whether your a simple BoomBustBlog follower or a paid subscriber) you would know that the odds are that BNP's bond portfolio would probably take a much bigger hit than that conservatively quoted above.  Here I demonstrated what more realistic numbers would look like in said model... image008image008image008

To note page 9 of that very same document addresses how this train of thought can not only be accelerated, but taken much further...

BNP_Paribus_First_Thoughts_4_Page_09BNP_Paribus_First_Thoughts_4_Page_09BNP_Paribus_First_Thoughts_4_Page_09

So, how bad could this faux accounting thing be? You know, there were two American banks that abused this FAS 157 cum Topic 820 loophole as well. There names were Bear Stearns and Lehman Brothers. I warned my readers well ahead of time with them as well - well before anybody else apparently had a clue (Is this the Breaking of the Bear? and Is Lehman really a lemming in disguise?). Well, at least in the case of BNP, it's a potential tangible equity wipe out, or is it? On to page 10 of said subscription document...

BNP_Paribus_First_Thoughts_4_Page_10BNP_Paribus_First_Thoughts_4_Page_10BNP_Paribus_First_Thoughts_4_Page_10

Yo, watch those level 2s! Of course there is more to BNP besides overpriced, over leveraged sovereign debt, liquidity issues and ALM mismatch, and lying about stretching Topic 820 rules, but I think that's enough for right now. Is all of this already priced into the free falling stock? Are these the ingredients for a European bank run? I'll let you decide, but BoomBustBloggers Saw this coming midsummer when this stock was at $50. Those who wish to subscribe to my research and services should click here. Those who don't subscribe can still benefit from the chronology that led up to the BIG BNP short (at least those who have come across my research for the first time)...

Thursday, 28 July 2011  The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement

Lastly... When everybody's lying, no one is trusted with telling the truth! There's the sovereigns themselves lying through their collective teeth, reference Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware! There's the so-called "Troika", reference Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!. Then there's these banks and those damn stressless stress tests... Again, as excerpted from French Banks Can Set Off Contagion That Will Make Central Bankers Long For The Good 'Ole Lehman Collapse Days!:

On that note, ZeroHedge has come out with a blockbuster explanatory article: Credit Suisse Buries European Banks, Sees Deutsche Bank And 65 Other Bank Failing Latest Stress Test, €400 Billion Capital Shortfall

A day after Credit Suisse killed the Chinese bank sector saying that the equity of virtually the entire space may be worthless if NPLs double, as they expect they will to about 10%, the Swiss bank proceeds to kill European banks next. Based on the latest farce out of Europe in the form of the third stress test, which is supposed to restore some confidence, it appears that what it will do is simply accelerate the flight out of everything bank related, but certainly out of anything RBS, Deutsche Bank, BNP, SocGen and Barclays related.

I'd like to add that I've ridiculed all of these stress tests, US and European, although the European stress tests were by far the biggest joke. Dexia passed with a grade of A (or so), and will be nationalized momentarily. 'Nuff said!

To wit: "In our estimation of what could be the “new EBA stress test” there would be 66 failures, with RBS, Deutsche Bank, and BNP needing the most capital – at €19bn, €14bn and €14bn respectively. Among the banks with the highest capital shortfalls,SocGen and Barclays would need roughly €13bn with Unicredit and Commerzbank respectively at €12bn and €11bn. In the figure below we present the stated results. We note RBS appears to be the most vulnerable although the company has said that the methodology, especially the calculation of trading income, is especially harsh for them, negatively impacting the results by c.80bps." Oops. Perhaps it is not too late for the EBA to back out of this latest process and say they were only kidding. And it gets even worse: "We present in this section an overview of the analysis which we published in our report ‘The lost decade’ – 15-Sep 2011. One of our conclusions was that the overall European banking sector is facing a €400bn capital shortfall which compares to a current market cap of €541bn." Said otherwise, we can now see why the FT reported yesterday that banks will be forced to go ahead and proceed with asset firesales: the mere thought of European banks raising new cash amounting to 75% of the entire industry's market cap, is beyond ridiculous. So good luck with those sales: just remember - he who sells first, sells best.

And the scary charts:

1. Capital Shortfalls under Stress Test part Trois (9% min. CET1 ratio)

 

Judged against these three requirements, Europe’s new plan is a miserly one. Its outlines emerged in a joint paper released on May 30th by France and Germany. The minimalism of the paper suggests the summit will offer little more than the establishment of single supervisor and a promise to set up a vaguely defined “resolution mechanism”.


Those who follow me know that I'm medium term bearish on both any sovereign nations and their out-sized, profligate, insolvent banking systems which they support. Ireland makes a good  example - If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It... and The Beginning Of The Great Irish Unwind?!?!?!.

Back to that Economist article:

If a pot of money is pledged it will probably be a small fund raised through a tax on banks and without the backing of governments. If Europe’s bail-out fund, the European Stability Mechanism (ESM), is referred to it is likely to be only as a last resort to recapitalise lenders after ailing countries have already bankrupted themselves standing behind their banks. A euro-wide deposit insurance fund is so controversial it isn’t polite to mention it.

...The legal challenges are also enormous. Each country in the euro has its own bankruptcy code. A change in the treaties governing the European Union would probably be needed to give a new resolution authority the power to seize bank assets and impose losses on creditors.

 Events outside the negotiating room have also reshaped the scope of a banking union. The “bail-in” of Cypriot banks earlier this year dipped into the savings of uninsured depositors in order to recapitalise lenders. Repeating that tactic would risk deposit flight from peripheral banks and a sharp increase in banks’ funding costs. But rather than committing public funds to shore up banks elsewhere, some politicians would doubtless prefer to hit uninsured depositors again.

But,,,, but,,,, without a definitive source of "rescue" capital, a bail-in is all but guaranteed, right Ireland???!!! I hate to pick on them, but the Irish make a good  example - If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It... and The Beginning Of The Great Irish Unwind?!?!?!

A strategy of incrementally moving towards a full banking union might have worked in normal times. Doing so in the middle of a crisis is risky. Over the coming year the ECB will have the unenviable task of assessing the health of the banks it is about to supervise. Its root-and-branch examination may well reveal gaping holes at a number of big banks. Yet without ready access to a pot of money to fill these holes, the ECB could be reluctant to force banks to come clean. “It is madness to expose capital shortfalls if you don’t know where new capital is going to come from,” says one bank supervisor.

Oh, I see. This must explain the blatantly fraudulent-esque goings on I uncovered in the Irish banking system. In case you haven't heard, I issued a Direct Challenge To Federal Reserve & Irish Central Bank Bubble Blowers. When I did Provide Proof That The Entire Irish Banking System Is A Sham, the ECB did absolutely nothing! No phone calls! No meetings! No emails! Makes you wonder why, eh? 

 "Over the coming year the ECB will have the unenviable task of assessing the health of the banks it is about to supervise. Its root-and-branch examination may well reveal gaping holes at a number of big banks. Yet without ready access to a pot of money to fill these holes, the ECB could be reluctant to force banks to come clean."

Madness, I tell you! Madness!!!

Published in BoomBustBlog

Reggie Middleton on UK Bank Taxation Without Representation

First up, a quick history lesson courtesy of Wikipedia:

"No taxation without representation" is a slogan originating during the 1750s and 1760s that summarized a primary grievance of the British colonists in the Thirteen Colonies, which was one of the major causes of the American Revolution. In short, many in those colonies believed that, as they were not directly represented in the distant British Parliament, any laws it passed taxing the colonists (such as the Sugar Act and the Stamp Act) were illegal under the Bill of Rights 1689, and were a denial of their rights as Englishmen.

The phrase captures a sentiment central to the cause of the English Civil War, as articulated by John Hampden who said “what an English King has no right to demand, an English subject has a right to refuse” in the Ship money case.

... The British Parliament had controlled colonial trade and taxed imports and exports since 1660.[1] By the 1760s, the Americans were being deprived of a historic right.[2] The English Bill of Rights 1689 had forbidden the imposition of taxes without the consent of Parliament. Since the colonists had no representation in Parliament, the taxes violated the guaranteed Rights of Englishmen.

...The phrase had been used for more than a generation in Ireland.[7][8] By 1765, the term was in use in Boston, and local politician James Otis was most famously associated with the phrase, "taxation without representation is tyranny."[9] In the course of the Revolutionary era (1750-1783), many arguments seeking to resolve the dispute surrounding Parliamentary sovereignty, self-governance, taxation, and the constitutional rights of 'commoners' to representation were pursued.[10]

Why go through this US grade school history lesson? Well, UK taxpayers have been paying substantial taxes to essentially bail out an Irish bank with no say so in how said bank is operated. As a matter of fact, they don't even know the extent of said bank's indebtedness despite paying a ton of money to bail it out. RBS investors have taken material losses due to this very same bank. Both of these parties went without adequate disclosure or... "representation".  A couple of months ago I penned a piece titled "I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets!" wherein the Royal Bank of Scotland's failure to adequately report the full (and quite excessive, in my opinion) liabilities of its ill-fated acquisition, Ulster Bank of Ireland. Ulster Bank pumped massive losses into RBS, who in turn neared collapsed and required a massive bailout by the UK taxpayer (billions of pounds massive), who still owns 81% of this sick creature as I type this missive. Those losses were generated by an Irish bank in Ireland, but paid by UK citizens, and the losses were materially understated in my opinion for Ulster Bank was/is much less solvent than RBS is letting on through its US SEC reporting, having encumbered all of its ECB eligible assets available for lending... ALL OF ITS ASSETS! See "I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets!" for complete details, it's a doozy!

I know more than a couple of UK taxpayers who'd much not rather pay Irish bad debts. I decided to rub a little salt in the UK wound by throwing some arithmetic illumination on the situation via an embedded Irish bad bank tax calculator...

The app below allows the UK Taxpayer to calculate for themselves exactly what their individual contribution (pro rata) is to the government bailout of RBS.

I've taken the liberty of pre-populating the input fields for you, but if you don't agree with the numbers then by all means insert your own!

Lo and behold, about a monthafter my reports the BBC published an article titled "Will the bad be taken out of RBS?" wherein they reported on plans to split the farce formerly known as a bank - RBS - into a good bank/bad bank scheme (ahem!). Shortly thereafter, the Irish Times ran the following article "UK Treasury considers Irish takeover of Ulster Bank - Reports suggest UK authorities want the Irish government to take control of bank". I really, really wonder why? As excerpted:

A “radical” restructuring of Royal Bank of Scotland, which is largely owned by the UK taxpayer, could see it transfer control of its Irish operation, Ulster Bank, to the Irish government.

The future of RBS is currently being considered by the Parliamentary Commission on Banking Standards, and a draft report from the commission called for the split of RBS into a good bank and a bad bank.

However, a speculative report from BBC business editor Robert Peston has suggested that “another, more radical option is also being assessed by the Treasury”.

This would involve somehow removing Ulster Bank from RBS. The bank has been one of the worst performing parts of the group, with losses of £1 billion in 2012.

Mr Peston said that one idea raised is to “transfer Ulster Bank into the arms and ownership of the Irish government”, by swapping all or part of the bank for the British loans and investments currently owned by Ireland’s “bad bank”, the National Asset Management Agency (Nama).

Hmmm... That's interesting, trading trash for garbage!

Published in BoomBustBlog

As the equity markets are benefiting from the forced zero rates of central banks world-wide, I remain cognizant that the core problems of the crash five years ago have went absolutely nowhere. As I have demonstrated to all that I am no perma-bear in calling the contrarian pair trade of the decade (short Apple: Deconstructing The Most Accurate Apple Analysis Ever- long Google: Reggie Middleton Goes For 2nd Win On CNBC Stock Challenge & Causes TROUBLE!!!). I'm not pessimistic, I'm realistic! My recent rant on the Irish banks included the post that pretty much laid out the evidence of a potential Irish bank collapse -  "If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It... I followed this up with a stern warning to Irishmen - "As Forewarned, The Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come". Who do you believe, me or your Irish government? Let me give the skeptical readers a little assistance...

Just a month and a half ago, we've had Irish officials proclaiming...

image004

Hey, ninety days or so later... guess what?

image008

These banks are likely to need a recap, a recap that will likely get a sloppy and ugly. I visited the UAE this time last year and noticed that would be an excellent source of capital for a shopping spree based upon the EU Bank deleveraging. It prompted me to detail my thoughts to subscribers for I was preparing to raise capital. 

Distressed Sales from European Sovereign Nations and Banks Page 01Distressed Sales from European Sovereign Nations and Banks Page 02Distressed Sales from European Sovereign Nations and Banks Page 03Distressed Sales from European Sovereign Nations and Banks Page 04Distressed Sales from European Sovereign Nations and Banks Page 05

This is just a portion of the report released (subscribers can find the full report in the Global Macro Section of the downloads area). One page in particular was particularly prescient, page 9... Remember what happened two months ago before you read this and be sure to notice the dates on the embedded documents... Bank deleveraging is REAL!!!

Distressed Sales from European Sovereign Nations and Banks Page 09

I have updated versions of this distressed asset acquisistion document which I will post for institutional subscribers later on in the day. Any institutions or high net worth individuals interested in my plans should feel free to contact me. 

Published in BoomBustBlog

Kiss Those Euros GoodbyeAs of today, all of the puzzle pieces for an Irish government cum ECB via Germany confiscation of Irish bank depositor money is in place. The first piece, Irish bank insolvency was clearly identified and articulated in "If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It... I drove the point home even further as the Irish PTB start to admit that their banks need to be recapitalized, in "The Beginning Of The Great Irish Unwind?!?!?!". The second piece of the puzzle is the political will to actually sacrifice bank depositors, clearly illustrated in "As Forewarned, The Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come". Now as of today, we have the final piece, the legal mechanism - which allegedly is just being debated but in reality is already in place. The template has already been established with Cyprus, ala "EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation".

The Irish are about to see their deposits above the 100k euro insured limit hit risk heretofore unseen. You see, weeks after my many warnings of Irishmen and women at financial risk, the Irish presidency of the European Council put forth a proposal to do just what I warned of ahead a key meeting of finance ministers next week. Whats of even more importance is the fact that, as in Cyprus, EU states have NOT ruled out the possibility of confiscating bank deposits below the EU insured limit of 100k euro. This means that there is far from a AAA credit covering your deposits. It almost happened a month or so ago, and nobody wants to rule put the potential of it happening again. Now, on to the news piece that has confirmed my many warnings, the last piece of the puzzle - from the Irish Times: Bank deposits of over €100,000 may be at risk...

Deposits of over €100,000 are likely to be hit in the event of future European bank collapses, according to a proposal put forward by the Irish presidency of the European Council ahead of a key meeting of finance ministers next week.

Discussions on the controversial bank resolution regime, which is likely to see savers with deposits over €100,000 “bailed in” as part of future bank wind-downs, are due to intensify this week in Brussels, ahead of Tuesday’s meeting, which will be chaired by Minister for Finance, Michael Noonan.

Under a compromise text proposed by the Irish presidency, uninsured deposits of over €100,000 would be bailed in in the event that a bank is resolved, but depositors would rank higher than other creditors in the event of a wind-down. In this scenario – known as “deposit preference” – depositors would rank at the very end of the process, with other creditors first absorbing losses.

"In this scenario – known as “deposit preference” – depositors would rank at the very end of the process, with other creditors first absorbing losses." Absolute non-sense. Simply smoke and mirrors for those who don't know any better. The only reason for there to be a wind-down in the first place is that there is no equity left in the bank. With gearing in the European banking model what it is, and the dearth of transparent (non-fraudulent) reporting what it is (see If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It...), the chances of there being any recovery is somewhere between zilch and nil, give or take a euro or two - reference LGD 100+: What's the Possibility of Certain European Banks Having a Loss Given Default Approaching 100%? and The Anatomy of a Serial European Banking Collapse to realize that once a counter party driven bank run starts, there may be less than nothing to divy up in the end. Lehman Brothers' US creditors received roughly 10 to 40 cents on the dollar, but after 5 years of wrangling, the European International arm was full repaid. Hey, do you feel lucky with your life savings? Even if you do feel lucky, you'll still need 5 years to spare and a ton of cash for legal fees.

However, some member states have not ruled out the possibility that insured deposits, i.e. deposits under €100,000, would be forced to bear losses in the event of a bank collapse even though these deposits would be likely to be protected by the deposit guarantee scheme.

As stated earlier, this ain't AAA coverage!

This year Jeroen Dijsselbloem, head of the group of 17 euro zone finance ministers, said that losses on bondholders and depositors could form part of future bank bailouts as euro zone officials seek to move the burden of bailouts away from taxpayers – as was the case in the Irish bailout – and on to private investors.

The European Commission argues that this switch from so-called “bailouts” to “bail-ins” would result in an allocation of losses that would not be worse than the losses that shareholders and creditors would have suffered in regular insolvency proceedings that apply to other private companies.

Ahem, that non-sense only works on the uneducated and/or the unassuming. The major difference is that creditors that would be subject to regular dissolution proceedings AND that are unsecured, would demand considerably higher rates of return. A borderline solvent bank whose officers AND regulators admit publicly is in need of additional capital infusions after receiving three thus far, and 96% losses in its publicly traded equity, would have to borrow money at 18%, not 2% - and that's being generous. See the bank deposit rate calculator below.

While the inclusion of large savers in future bank bailouts is now widely accepted, significant differences still remain between member states.

While the new rules governing bank resolution were first intended to come into place in 2018, since the Cypriot bailout there have been calls from senior EU figures such as European Central Bank president Mario Draghi and EU economics affairs commissioner Olli Rehn to introduce the new regime as early as 2015.

The Irish presidency of the European Council is hoping to reach a common position by the end of next month.

The little app below calculates what return you should expect to receive to take on the risk of a potential 40% haircut. The second tab offers what recent Cyprus bank rates were. Do you see a disparity???

 Other hard hitting pieces on the resurgent EU banking crisis

 

Published in BoomBustBlog

Who Do Your Believe Reggie Middleton or Central Bank of Ireland

I have spent two week warning Ireland and the world about the Irish banking system, with a summation available in the aptly titled post, If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It...Yesterday, the Irish media STARTS to come clean, although they are still not as explicit as the Irish Sun article which put my researched facts front and center...

 Click to enlarge...

 

SUN-SUN-PAGES-NEWS-MONEY-6066 copy copySUN-SUN-PAGES-NEWS-MONEY-6066 copy copy

 

From the Irish Times

Yesterday, at the press briefing to discuss the Central Bank’s 2012 annual report, Honohan matter-of-factly told us that the Irish banks would need more funding before 2019 due to changes in capital reporting requirements imposed by the new Basel III accord.

The transition period for these changes to be implemented by banks in the EU is January 2019.

There were more than a few eyebrows raised at this frank admission.

Honohan’s statement is in stark contrast to those of the various Irish-owned banks –AIB, Bank of Ireland and Permanent TSB. In public at least, the banks have maintained that they are adequately capitalised and that they do not envisage having to raise additional capital to bolster their ratios.

From the Independent:

Mr Honohan said the Central Bank was still working towards carrying out stress tests on the banks at the latter part of the year. By 2019, the banks will need more capital under international regulations.

"In an ideal situation, that capital will come from private investors, as is happening all over Europe, all over the world, where bank capital is being pushed up through the market system," he said.

From private investors? Yeah, right! As said private investors are hoodwinked, just like those poor muppets in the US - reference What Should The US Do If One Of The Biggest Irish Banks Blatantly Defrauded US Investors:

The Bank of Ireland

In the 2008 Annual Accounts (Irish version of Annual Report) of Bank of Ireland (see attached, page 178) it states the bank gave a first floating charge in favor of the Central Bank of Ireland (an arm of the European Central Bank) and the Financial Services Authority of Ireland over the Banks ‘right, title, interest, benefit, present and future, in and to certain segregated securities listed in an Eligible Securities schedule.’

Fact: The BoI 2008 Irish accounts (~annual report) refer to the charges in their Disclosure Section (see attached page from 2008 accounts) where they describe the charge as being over ‘certain segregated securities.’

Of paramount importance for US investors and regulators, there is an absolute omission of this information in the Bank of Ireland SEC 20F returns for 2008.

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From the Irish Examiner:

However, banks would need capital over the medium term to comply with Basel III capital requirements by 2019. It is hoped the banks will be able to raise this from private investors, he added. He hoped Ireland would not need the help of the ECB’s outright monetary transaction programme when it exits the bailout programme. However, if it met certain criteria, then it would be able to use the facility. 

But private investors have done so well in the Irish banks, particularly considering their pristine disclosure policies, right??? Again, reference What Should The US Do If One Of The Biggest Irish Banks Blatantly Defrauded US Investors:

The Bank of Ireland 2008 Irish Annual Accounts refer to the charges in their Disclosure Section (see attached page from 2008 accounts) where they describe the charge as being over ‘certain segregated securities,’ but no mention of ‘right, title, interest, benefit, present and future, in and to certain segregated securities listed in an EligibleSecurities schedule.’

There is also no mention of any information related to this floating charge in the Bank of Ireland SEC 20F returns for 2008.

It appears that this floating charge was not disclosed at the time of the stress testing of the bank conducted by the European Banking Authority.

It is possible that I may have overlooked such, and because of that possibility I have made the SEC 20F available for all who want to check over my work. Here is the UBI 2008 accounts and here is the SEC 20f-2008 for the Bank of Ireland.

Now of course, to constitute fraud there has to be a loss on the part of the one being defrauded or a gain on the part of the one being defrauded - at least according to Wikipedia. Otherwise, it would be a hoax. That's the Irish banking system, and not this bank in particular. So...

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If you believe that the information above actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message

Remember, extreme wealth concentrates, so you don't have to... Coming from a "Cyprus'd" bank near you!

Subscribers, can download ALL documents supporting shenanigans by these banks (click here to subscribe):

Published in BoomBustBlog

I was recently alerted to an article in Business Insider regarding a Twitter battle between Nasim Taleb and fellow academics, analysts and financial journalists. What caught my attention was:

  1. Taleb called out the academics for charlatans, which I felt was quite bold.
  2. Two, I agree with him
  3. One of the academics, who presided over the US bubble at the Fed AND the Irish banking bubble at the Central Bank of Ireland is also the guy whose proclamations are the antithesis of my recent Irish banking research, see 
    1. As Forewarned, The Irish Savers Have Just Been "Cyprus'd", And There's MUCH MORE "Cyprusing" To Come
    2. What Should The US Do If One Of The Biggest Banks In Ireland Blatantly Defrauded US Investors?
    3. If I Provide Proof That The Entire Irish Banking System Is A Sham, Does It Set Up A Much Needed System Reboot? Let's Go For It...

I attempted to join the conversation, albeit a little late. See below...

As you can see, nobody wanted to chat with me, so the following day (this morning), I decided to force the issue with a barage of facts. You know how facts tend to get in the way of a good Twitter flame war, don't you?

If media pundits and government/Central Bank consultants were gauged (and paid) based upon thier track records and successes, methinks this would be a better world to live in.

Well, I haven't heard back from the man thus far, so....

Published in BoomBustBlog

This is likely to be the biggest financial story of the month, a story that's bigger than Cyprus, and a story that you're not going to see in American mainstream media - not by a long shot. Let's take this from the top, for BoomBustBloggers were warned weeks in advanced. On Wednesday, 27 March 2013 I published EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation wherein I explained that the situation of extreme loss faced by Cyprus bank depositors, savers and bondholders will not be a unique story - as excerpted:

The deposit accounts that you were getting just a few hundred basis points for have developed:

    1. Liquidity risks: The capital controls that weren't supposed to happen (see No Capital Controls In The EMU? Liar Liar Pants On Fire), happened! See Cyprus Banks Set To Reopen, To Serve As Glorified ATMs With A €300 Cash Withdrawal Limit
    2. Credit risks: Your so-called safe investments will suffer up to a 40% haircut! Mainstream Media Says Cyprus Salvaged By EU Deal, I Say Cyprus Is Sacrificed By Said Deal - Thrown Into Depression
    3. and Market risks: Demand depositors have forcibly purchased highly speculative synthetic call options with their haircuts that are unlikely to compensate anyone for anything!

The little app below calculates what return you should expect to receive to take on the risk of a potential 40% haircut. The second tab offers what recent Cyprus bank rates were. Do you see a disparity???

It's not just Cyprus either. The problems that plagued Cyprus banks plague banks in much larger nations within, and around the EU. From Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe you see institutions that are literally too big to be handled safely...

The Banks Are Bigger Than Many of the Sovereigns

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 Now, the "Overbanked" article was posted back in 2010. That's right, I warned about the two Irish banks listed in the chart above THREE YEARS ago, You've had plenty of time to mover your money out! Speaking of those Irish banks, I warned the Irish again a few weeks ago as well - with specificity - in Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!! Here, I focused on Anglo Irish, already nationalized and being wound down. I warned that there will be unhappy returns, if there would be any, just like Cyprus - as excerpted:

First Off Let's Make Bank Collapse Real...

To begin with, let's make this Cyprus thing real, by showing a live example of what happens when to a real small business that had the gall to bank with Laikie Bank, from the Bitcoin forum I excerpt a post that puts things into perspective, re: bank account confiscation:

Later that weekend in the Irish media... As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland

Anglo Irish Bank/IBRC bondholders will actually get some of their money back!

April Fools!!!

As if on cue, a day after my expose on Anglo Irish Bank and its shenanigans (see Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!), The Irish Business Post announces senior bondholders will get wiped out. That's right, a 100% loss! Zilch! Zero! Nada! Now, that's investing. That's getting "Cyprus'd", plus some!!! From Businesspost.ie: IBRC senior bondholders to be burned

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Of course, the story doesn't end with the bondholders. Exactly as anticipated in the articles mentioned above, and as published in the Irish mainstream media over the weekend...

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As you can see, this is actually MUCH WORSE than the deal the Cypriots got. These Irish pensioners are facing a total wipeout - 100% LOSS!!!

If you're not disenfranchised, yet, hold on... It get's worse, much worse. The Irish Examiner published this today... 

ECB gags State on IBRC liquidation

The ECB has gagged the Government from releasing any information in relation to the liquidation of the former Anglo Irish bank, IBRC. A senior official in the Department of Finance told the Irish Examiner they were under strict instructions from the ECB not to release any details to the public. “What they [ECB] have said from an early stage is that if there is any release, at all, then all negotiations are off. They do not want to discuss this in any forum, other than that of a member state and the ECB council,” he said.  The department has received about 16 freedom of information requests in relation to the IBRC liquidation and is now considering adopting a policy position that would allow it to refuse all applications for the release of information. 

Sinn Féin finance spokesman Pearse Doherty said the decision to liquidate IBRC was one of the biggest ever made by the State and he was concerned certain firms may have used insider information to secure payments. “The minister has refused several requests from me for information pertaining to the weeks and months before the event, specifically concerning whether certain sources in the know used confidential information to fast-track invoices in anticipation of liquidation.

So there you have it. Unless you've been hearing a lot about Irish bank collapse lately, it seems if you don't hear it from Reggie Middleton and BoomBustBlog, you're probably not going to hear it at all - so says the powers that be.  

It's not just Anglo Irish Bank, either. I've warned about several other Irish banks. Here's another one I feel likely to give Irish savers a nasty surprise...

You see, the banks can get away with this fleecing because the common person doesn't get a hold of my information and analysis very often, at least not until it's too late. But...... Guess what happened in the Irish mainstream media over the weekend, in the Irish Sun, the most popular rag on the most popular day....

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Subscribers, can download ALL documents supporting shenanigans by these banks (click here to subscribe):

For my US readers who feel this has very little to do with them, I query...

What Should The US Do If One Of The Biggest Banks In Ireland Blatantly Defrauded US Investors?

fraud

For my UK readers who may be a little on the apathetic side...

I Illustrate How The Irish Banking Cancer Spreads To The UK Taxpayer And Metastasizes Through US Markets!

The app below allows the UK Taxpayer to calculate for themselves exactly what their individual contribution (pro rata) is to the government bailout of RBS.

I've taken the liberty of pre-populating the input fields for you, but if you don't agree with the numbers then by all means insert your own!

Other hard hitting pieces on the resurgent EU banking crisis

Published in BoomBustBlog

Entering my third week of publicizing my research into what I see as the potential collapse of the Irish banking system, it is about time to bring the series to a close. Before I do, though, there are a couple of loose ends that need tightening up. One is the assertion that the points that I have made are sensationalist. Anyone who has objectively read the articles I put forth cannot be objective themselves and come to a "sensationalist" conclusion. Secondly, there appears to be some who believe the many charges that I proffered as evidence are not actually evidence of a potentially nefarious plot to collude or misrepresent. Well, I believe the case of misrepresentation was made beyond a shadow of a reasonable doubt in Are You About To Get Cyprus'd in Ireland… 

For those of you who actually think it's acceptable for large, international banks to have to mortgage their entire balance sheets, or the vast amount of their securities and liquid asset holdings to essentially obtain access to what essentially is a cross-border, real time checking account (Target 2), I have this fabulous bridge to sell you in Brooklyn... Real cheap! 

Let's examine the argument that the multiple charges were entered by various large banks for the legitimate purpose of facilitating access to Target 2, and not an emergency dash for liquidity funding from the ECB.

First, as excerpted from Wikipedia, a description of how Target 2 operates in terms of collateral:

Liquidity management in TARGET2

The availability and cost of liquidity are two crucial issues for the smooth processing of payments in RTGS systems.

The cost or liquidity is the pertinent issue here. The liquidity "allegedly" sought by the Irish banks is EXTREMELY expensive for it calls for them to leverage/encumber/pledge practically their entire tradable balance sheet. Contrast this with the US Fedwire, were reserves are put up. Yes, reserves, not ALL of central bank lending-eligible securities AND the liquid payment accounts. One cannot practically classify the Irish set-up as a reserve since it is practically everything that the bank has sans plant, equipment and nigh worthless goodwill. Fedwire is the largest system of it's type in existence, yet it requires less collateralization than it's smaller brethren in Europe, Target 2? Either everybody in Europe knows you can't trust European banks or Ireland was given a back door bailout through the Target 2 collateralization system. No matter which way you look at it (both are probably true), it's not positive! Now, back to the Wikipedia write up on Target 2...

In TARGET2, liquidity can be managed very flexibly and is available at low cost since fully remunerated minimum reserves – which credit institutions are required to hold with their central bank – can be used in full for settlement purposes during the day. The averaging provisions applied to minimum reserves allow banks to be flexible in their end-of-day liquidity management. The overnight lending and deposit facilities also allow for continuous lliquidity management decisions. The Eurosystem provides intraday credit. This credit must be fully collateralised and no interest is charged. However, all Eurosystem credit must be fully collateralised, i.e. secured by other assets.

So, now that we've established that the Irish banks have applied for, and received credit in exchange for pledging practically their entire securities and liquid assets portfolio, it is in no way debatable that these banks a) were (and are still, currently) leveraged to the max and b) tied up all of their assets with a pledge of collateralization to (allegedly) back up participation in this payment system. Back to Wikipedia... 

The range of eligible collateral is very wide.

This is to be read as the quality, saleability and marketability of much of the collateral varies greatly - with much of it being worth considerably less than the claim against which it was pledged...

Assets eligible for monetary policy purposes are also eligible for intraday credit. Under Eurosystem rules, credit can only be granted by the national central bank of the Member State where the participant is established... 

Now let's drill down into how Irish banks, in particular, access Target 2 liquidity as compared to their international brethren. On April 3rd I posted The Unique, Peculiar & Unusual Method Irish Banks Used To Say "We're Insolvent"!!! whose excerpt I present below:

A reader posted the following in reference to Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros... As a refresher, this is the graphical  arrangement of the interconnected dealings between the ECB and the Irish banks... 
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I suspect what you are looking at Reggie is not really an issue for the bank's capital. It looks to me like the ECB is securing itself against the risk that a bank won't voluntarily return a mistaken or fraudulent transfer of funds via Target2. I think in order to participate in Target2, the bank has to contractually give the ECB the right to seize and sell its assets, if that's what it takes to retrieve a mistaken or fraudulent transfer of funds.

This is what reserves are for. By definition, reserves are supposed to be a fractional amount of an entity's holdings to secure against a loss. These Irish banks aren't putting up fractional reserves, they're putting up their entire business. Imagine if you went to a bank to apply for a checking account with real time clearing and a condition of you getting said account was for your to mortgage your house, all of your stocks and bonds, and any other bank accounts. Sounds a bit fishy when put that way, doesn't it?

An amount of readily marketable assets are put up as collateral against the risk described above. If a bank has to put its entire business (after all, a bank's business is money and securities, so these banks put up all of their money and securities) up as a reserve just to essentially participate in a payment system, then it most assuredly...

Tells you something about the level of trust among Europeans. You might want to check other Eurozone banks with US listings and see if all of them don't have this exact same charge filed with the SEC. My guess is they all do.  

Um, no they don't. That was the basis of my claim of misrepresentation and potential fraud. See

At first I thought it might be related to the refinancing and emergency liquidity assistance loans AIB has outstanding from the Irish central bank. Collateral is pledged for those which the ICB could sell if it decides not to roll over the funding and AIB doesn't repay. But the reference to Target2 would make no sense if this were about collateral posted to the ICB.

That said AIB is indeed still a mess for a lot of other reasons.

Actually, AIB is a mess for this reason AND many other reasons as well. The inclusion of charges for the purposes of Target 2 is likely a sham. The Irish banks were dead broke, and without a printing press to manufacture funny munny like we do here in the states. They were fresh out of eligible collateral to pledge to the ECB for more emergency loans. Here's evidence that the Irish charge system was not only unique, but not necessary for the purposes of using Target 2 as an excuse to access emergency funding.

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As you can see, Ireland is unique among ALL countries in the EMU in that it, and only it, uses charges to secure access funding. But of course it's just a coincidence, right?!
Okay, let's suppose I'm full of sh1t and have made all of this up as some sort of conspiracy theory. After, it's all just circumstantial evidence, right (albeit an awful lot of it). The charges that I presented in my various articles (see the reference list below) did say that they were for the purposes of Target 2 and we all know banks would never, ever, ever lie, right? Ha! That's funny, even when I just type it! 
Below, please find an all-encompassing charge document from the Bank of Scotland (Ireland) in favor to the Irish Central Bank. The annotations are self explanatory, and keep in mind the amount secured (practically everything) and the amount pledged (practically everything). After you finish reading through the document, let me know in the comment section below if you can determine why the charge was issued...

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So, here we have a comprehensive charge, all-inclusive, not referencing Target 2 in any way whatsoever, filed on the exact same date as EVERY major bank in Ireland - during the middle of the biggest banking crisis Ireland has ever had. Oh, and by the way... this charge or any reference hereto, is nowhere to be found in the company's reporting to its regulators and/or investors - at least as far as I could determine. Hmmmm... Of course, these banks are healthy. Nothing to see here, move on and continue with your daily dose of state-sanctioned, mainstream media piped, independent thought numbing disinformation and propaganda.

Remember, extreme wealth concentrates, so you don't have to... Coming from a "Cyprus'd" bank near you!

Other hard hitting pieces on the resurgent EU banking crisis

Published in BoomBustBlog