The EU Bail-In Directive: Dark Clouds are Gathering

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Portugal’s Rickety Banking System

After the unseemly bankruptcy of the Espirito Santo Group and the associated bank, then Portugal’s second biggest (likely a result of not praying enough, see: “Big Portuguese Bank Gets Into Trouble” and “Fears Over Banco Espirito Santo Escalate” for the gory details), Portugal’s state-run deposit insurance fund basically ran out of money.

It turns out that Europe’s new Bank Recovery and Resolution Directive (BRRD for short) came just in time for Portugal. At the end of 2015, another Portuguese bank bit the dust, the country’s seventh largest lender by assets, Banif. Portugal’s government once again decided to bail the bank out, but with strings attached. Subordinated bondholders and shareholders were essentially wiped out, which is as it should be.

 

Banif, weeklyBanif SA, weekly. Although this is hard to see on this linear chart, the stock rose by 40% today, to €0.002. Shareholders are allegedly planning to throw a wild party in Lisbon over the weekend (we were unable to confirm this rumor) – click to enlarge.

 

Senior bondholders and depositors were spared however, with Portugal’s overburdened taxpayers once again footing the bill. According to the FT:

 

Portugal has agreed a €2.2bn state rescue for Banco International do Funchal (Banif), splitting the Madeira-based lender into “good” and “bad” banks and selling its healthy assets to Spain’s Santander for €150m in the country’s second bank bailout in less than 18 months.

António Costa, Portugal’s new socialist prime minister, said the bailout would involve “a high cost for taxpayers” but had the advantage of being “a definitive solution”. Branches would open normally on Monday, he said. The rescue, which “bails in” shareholders and subordinated creditors, follows the €4.9bn bailout in August last year of Banco Espírito Santo, once Portugal’s largest listed bank, whose healthy assets, split off into Novo Banco, remain unsold.

In a statement late on Sunday night, the Bank of Portugal said the rescue of Banif would involve “total public support” estimated at €2.25bn to cover “future contingencies”, of which €1.76bn would come directly from the state and €489m from a bank resolution fund, to which all banks contribute.The bailout protects depositors and senior creditors and ensures that Banif’s operations, transferred to Santander Totta, the Spanish group’s Portuguese subsidiary, will continue to “function normally”, the central bank said.

Shareholders and subordinated creditors would be left in Banif, retaining “a very restricted group of assets” that are to be liquidated, the Bank of Portugal said. “Problematic assets” would be transferred to a special asset management vehicle. The rescue partly mirrors the 2014 bailout of BES, which was split into “good” and “bad” banks after its profits were hit by exposure to the heavily indebted Espírito Santo family business empire.

Banif is Portugal’s seventh largest lender with total assets valued at €12.8bn in June, equivalent to about 7 per cent of Portugal’s gross domestic product, and deposits totalling €6.3bn. The bank is the dominant lender in the Portuguese islands of Madeira and the Azores, where it accounts for more than 30 per cent of total deposits.”

 

(emphasis added)

Since no deposits were wiped out as a result of the bail-out, Portugal’s money supply won’t be affected. However, Banif’s downfall is a reminder that Portugal’s banking system remains quite rickety. We dimly remember someone saying that the bail-out of BES would be the last such problem. Evidently it wasn’t. Continue reading

The Proof Is In: The US Government Is The Most Complete Criminal Organization In Human History

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Unique among the countries on earth, the US government insists that its laws and dictates take precedence over the sovereignty of nations. Washington asserts the power of US courts over foreign nationals and claims extra-territorial jurisdiction of US courts over foreign activities of which Washington or American interest groups disapprove. Perhaps the worst results of Washington’s disregard for the sovereignty of countries is the power Washington has exercised over foreign nationals solely on the basis of terrorism charges devoid of any evidence.

Consider a few examples. Washington first forced the Swiss government to violate its own banking laws. Then Washington forced Switzerland to repeal its bank secrecy laws. Allegedly, Switzerland is a democracy, but the country’s laws are determined in Washington by people not elected by the Swiss to represent them.

Consider the “soccer scandal” that Washington concocted, apparently for the purpose of embarrassing Russia. The soccer organization’s home is Switzerland, but this did not stop Washington from sending FBI agents into Switzerland to arrest Swiss citizens. Try to imagine Switzerland sending Swiss federal agents into the US to arrest Americans.

Consider the $9 billion fine that Washington imposed on a French bank for failure to fully comply with Washington’s sanctions against Iran. This assertion of Washington’s control over a foreign financial institution is even more audaciously illegal in view of the fact that the sanctions Washington imposed on Iran and requires other sovereign countries to obey are themselves strictly illegal. Indeed, in this case we have a case of triple illegality as the sanctions were imposed on the basis of concocted and fabricated charges that were lies.

Or consider that Washington asserted its authority over the contract between a French shipbuilder and the Russian government and forced the French company to violate a contract at the expense of billions of dollars to the French company and a large number of jobs to the French economy. This was a part of Washington teaching the Russians a lesson for not following Washington’s orders in Crimea.

Try to imagine a world in which every country asserted the extra-territoriality of its law. The planet would be in permanent chaos with world GDP expended in legal and military battles.

Neoconned Washington claims that as History chose America to exercise its hegemony over the world, no other law is relevant. Only Washington’s will counts. Law itself is not even needed as Washington often substitutes orders for laws as when Richard Armitage, Deputy Secretary of State (an unelected position) told the President of Pakistan to do as he is told or “we will bomb you into the stone age.” http://news.bbc.co.uk/2/hi/south_asia/5369198.stm

Try to imagine the Presidents of Russia or China giving such an order to a sovereign nation. Continue reading

Must See Presentation: “Wealth” of “Positive Catalysts” for Gold

Submitted by Mark O’Byrne  –  GoldCore

Grant Williams gave another must see presentation at the Mines and Money Conference in London last month, laying out why he believes the gold price is languishing despite a wealth of what would ordinarily be “positive catalysts.”

Williams’ presentation is titled “Gold: The Unsurance Policy — Love It or Loathe It.” It is 28 minutes long and can be viewed here:

He notes the many incongruities to be seen in the gold market today and that while “nobody seems to care” about gold anymore, central banks have turned from sellers to buyers and demand for bullion is robust globally, especially in China, where the Shanghai Gold Exchange (SGE) is delivering more than 50 times more gold than the exchange perceived to set world prices, the New York Commodities Exchange (COMEX).

Further, Williams says, while the gold price has been slaughtered for four years, simultaneously the fundamental factors supporting a higher price have increased greatly.

Williams notes that market rigging by central banks and their agent investment banks may be a cause of pricing incongruities. He concludes that eventually everyone will care about the gold price and that there’s not enough gold to accommodate everyone.

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• David Bowie Dies Aged 69 (Reuters)
• Chinese Stocks Down 5%, As Rout Ricochets In Asia (MarketWatch)
• Chinese Stocks Extend Rout as Economic Growth Concerns Deepen (BBG)
• Yuan Liquidity Extremely Tight, Interbank Rates Soar In Hong Kong (BBG)
• London Hedge Fund Omni Sees 15% Yuan Drop, and More in a Crisis (BBG)
• Australia Bet The House On Never-Ending Chinese Growth (Guardian)
• India Concerned About Chinese Currency Devaluation (Reuters)
• China PM: We’ll Let Market Forces Fix Overcapacity (Reuters)
• Fed’s Williams: “We Got It Wrong” On Benefits Of Low Oil Prices (ZH)
• Free Capital Flows Can Put Economies In A Bind (Münchau)
• Pensions, Mutual Funds Turn Back to Cash (WSJ)
• UK House Price To Crash As Global Asset Prices Unravel (Tel.)
• The West Is Losing The Battle For The Heart Of Europe (Reuters)
• Newly Elected Catalan President Vows Independence From Spain By 2017 (RT)
• Dutch ‘No’ To Kiev-EU Accord Could Trip Continental Crisis: Juncker (AFP)
• Britain Abandons Onshore Wind Just As New Technology Makes It Cheap (AEP)
• 400,000 Syrians Starving In Besieged Areas (AlJazeera)
• World’s Poor Lose Out As Aid Is Diverted To The Refugee Crisis (Guardian)