European Banks Collapse To 11-Month Lows

[Hydrogen]

Yesterday we exposed the globally contagious spread of funding market distress into the credit risk of major US banks, and today it has accelerated, spreading to Europe's banks as their stocks crashed to the lowest in 11 months...

Deutsche Bank is leading European banking's collapse...



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Credit risk is breaking out...



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As Credit diverges extremely bearishly from stocks...



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And it's about to get even worse...



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As three-month dollar Libor extended its streak to 32 straight increases, though the rise in the setting is the smallest since March 8. The crucial USD Libor-OIS spread rises to 56.8bp, widest level since May 2009 (as 3M Libor at 2.2856% is the highest since November 2008, vs 2.2711% prior session).

As we noted yesterday, the key is whether rising Libor rates will fuel a funding crisis - something we have been worrying about all year (as we detailed above with the blowout in the Libor-OIS spread)...

“We usually don’t see this kind of divergence in rates without some sort of credit issue,” said Margaret Kerins, head of fixed-income strategy at BMO Capital Markets Corp., referring to Libor’s rise versus OIS.

“At what point does all this become damaging and how far does it go? That is the issue.”

It appears to be damaging now..

“There has been sort of the perfect storm of factors tightening financial conditions,” said Russ Certo, head of rates at Brean Capital in New York.

“Banks do have tremendous liquidity still, but it’s at a higher price.”

But, but, but... "fortress balance sheets"?

https://www.zerohedge.com/news/2018-03-22/funding-stress-contagion-spreads-european-banks-collapse-11-month-lows

....

The topic of european banks having liquidity issues or "funding contagions" as they prefer to characterize it, has cropped up in this section a few times in 2017. There have been articles posted about european banks proposing to impose limits on withdrawals with proposals to decrease the total sum to which insurance covers individual depositor accounts.

In some cases, it appears that negative news stories involving european banks may have been scrubbed from google search results. If you remember reading a news article about something bad happening with a european bank in 2017 and try to find the article, it might be difficult to do so.

Anyways I'm certain people are tired of discussing "bitcoin volatility" by now. Thankfully we can now discuss bank volatility instead  and perhaps question why institutions like banks which people rely on to provide economic and financial stability may be less stable than we would like them to be.

[hodlftw]

Banks generally suck, all they do is loan out the money you give them at an exorbitant rate. I did however find an article from 2017 that discusses the closing of two Italian banks. https://www.nytimes.com/2017/06/23/business/dealbook/banks-italy-veneto-popolare.html. Nobody is safe from financial ruin, not even banks and the average person should wise up to this fact quickly.

[Beerwizzard]

That's just my humble opinion but for the last years I see the situation when some EU banks and countries are simply overloaded with money. Some of them are trying to implement the negative interest rate while the others are giving money to everyone with zero interest. They are doing everything in order to boost the economy and make people somegow use money (open new businesess for example, that's pretty easy when you have almost 0% loan). While all those things can cause the debt crisis. Btw everything is not that bad because they had a good growth before (at least some years).

[wxa7115]

That's just my humble opinion but for the last years I see the situation when some EU banks and countries are simply overloaded with money. Some of them are trying to implement the negative interest rate while the others are giving money to everyone with zero interest. They are doing everything in order to boost the economy and make people somegow use money (open new businesess for example, that's pretty easy when you have almost 0% loan). While all those things can cause the debt crisis. Btw everything is not that bad because they had a good growth before (at least some years).

This is happening all over the world, but there is a limit to how much credit you can give, it is impossible to solve a credit crisis with more credit, and the people are realizing this, they may be unable to pinpoint the reason for why the economy is not doing as well as it should but they know something is wrong so people are not opening new businesses because they know this is a bad environment to do it.