Many European Banks Would Collapse Without Regulators’ Help: Fitch, by Don Quijones

It’s worrisome when regulatory forebearance is the only thing keeping some banks afloat. From Don Quijones at wolfstreet.com:

Dozens of Greek, Italian, Spanish and even German lenders have volumes of troubled assets higher or similar to that of Spain’s fallen lender Banco Popular. They, too, are at risk of insolvency. This stark observation came from Bridget Gandy, director of financial institutions for Fitch Ratings, who spoke at a conference in London on Thursday.

The troubled banks include:

  • Greece’s HB, Piraeus, NBG, Eurobank and Alpha;
  • Italy’s Monte dei Pachi di Siena (which is in the process of being rescued with state funds), Carige (9th largest bank, now under ECB orders to raise capital or else), CreVal, and the two collapsed banks, Veneto and Vicenza (whose senior bondholders were bailed out last weekend);
  • Germany’s Bremer Landesbank (which just cancel interest payments on its CoCo bonds) and shipping lender HSH Nordbank.
  • Spain’s Liberbank and majority state-owned BMN and Bankia, which are completing a merger after private-sector institutions refused to buy BMN. Now, the problems on BMN’s balance sheet belong to Bankia, which already has its own set of issues, Gandy said.

That many of Europe’s banks are teetering on the brink of insolvency is not exactly new news. Most of the problems that caused the financial crisis have not been resolved. As the financial journalist and former investment banker Nomi Prins said in a 2015 interview with Dutch media group VPRO, “in Europe there still exist massive amounts of trades (on banks’ balance sheets) that are underwater and going wrong every day.”

According to a chart presented by Gandy, most of the banks she cited (in particular the Greek and Italian ones) have total unprovisioned non-performing assets that clearly exceed their total level of capital. In other words, if the losses on those assets crystallized, the banks would run out of funds.

To continue reading: Many European Banks Would Collapse Without Regulators’ Help: Fitch

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