Inquiring minds might be interested in stats on French and Italian bank deposits and deposit guarantees.
Let’s start with a look at equity in FGDR, the French guarantee company vs. the amount of deposits according to ECB stats.
The above chart from page 25 of the FGDR Deposit Guarantee 2014 annual report.
The mechanism has about €3.13 billion equity as of December 2014.
French and Italian Bank Deposits
French bank deposits total €4,068 billion as of December 2015 according to the ECB Euro Residents Deposit Report.
Not all of those deposits are covered by insurance. The guarantee is limited to the first €100,000.
Look at things this way: €3.13 billion would cover a mere 31,000 accounts of €100,000 each.
From the same report above, Italy has €2,395 in deposits.
No doubt, you are now wondering how big Italy’s guarantee fund is.
So am I.
In fact I wonder if Italy and nine other eurozone contries have them at all, or if they do, what shape those deposit guarantee funds are in.
10 Eurozone Countries Cited for Noncompliance on Deposit Guarantees
Please consider this December 2015 European Commission Press Release on Deposit Schemes.
The European Commission has formally requested Belgium, Cyprus, Estonia, Greece, Italy, Luxembourg, Poland, Romania, Slovenia and Sweden to fully implement the Deposit Guarantee Schemes Directive (DGSD).
The European Commission has formally requested Belgium, Cyprus, Estonia, Greece, Italy, Luxembourg, Poland, Romania, Slovenia and Sweden to fully implement the Deposit Guarantee Schemes‘ Directive (Directive 2014/49/EU, DGSD). This Directive, which builds upon the previous Directive 94/19/EC of 1994, improves the protection of deposits. Depositors will benefit from quicker pay-outs and a stronger safety net as more unified funding requirements will ensure that deposit guarantee schemes are pre-funded and will be able to fulfil their obligations towards depositors more efficiently. It is a step towards a fully-fledged Banking Union to create a safer and sounder financial sector in the wake of the financial crisis.
The deadline for transposing these rules into national law was 3 July 2015 (see MEMO/13/1176). However, 10 EU countries have failed to implement these rules into their national law. The Commission’s request takes the form of a reasoned opinion. If these Member States fail to comply within two months, the Commission may decide to refer them to the Court of Justice of the EU.
Italy Bank Bailout Coming Up?
Leaving the issue of deposit guarantees aside, some of which obviously exist in name only, recall that Italian banks have about €200 billion in nonperforming loans.
Italy and the ECB would like nothing more than to sweep those loans under the rug.
Thus, it should be no surprise to discover ECB in Talks with Italy Over Buying Bundles of Bad Loans.
The European Central Bank is in talks with the Italian government about buying bundles of bad loans as part of its asset-purchase program and accepting them as collateral from banks in return for cash, the Italian Treasury said.
Nonetheless, it would likely fuel a debate in other countries about whether the ECB is taking on too much risk by buying asset-backed securities (ABS) based on loans that have not been repaid for roughly three months.
Italian Treasury officials told reporters the ECB may buy these securities as part of its 1.5 trillion euros asset-purchase program or accept them as collateral from banks in return for cash, in so called repurchase agreements.
The ECB declined to comment.
In November last year, an ECB source said that buying rebundled non-performing loans could be an extreme option if the euro zone’s economic situation became “really bad”.
Are things “Really Bad” Enough?
I am quite certain things are far worse than anyone is willing to admit.
Mike “Mish” Shedlock
If the ECB starts buying bad loans what would stop every bank from dumping their non-preforming loans on them? Then what happens to the credibility of the ECB and what are the consequences. Depreciating currency, inflation?
As far as I have noticed so far the ECB is able to set ellegibility for what it buys on a company by company basis for not ordinary transactions, adhering to an adjustable limit only. In the case of sovereign debt the quantity was weighted evenly between countries so as to avoid accusations of direct funding of government, but I don’t think that would apply to banks. Someone correct me on all of that if I am out on a detail.
Ironically, apart from acknowledging losses, it may even boost credibility of the ECB and currency as they may be understood to be willing to intervene and monetize at will – means losses aren’t fully recognised but business gets to carry on with more security ( from a financial investor viewpoint). Probably means some volatility to game too.
Do you ever sleep?
Blogs can be set to be released at any time. But you can be sure Mish has very many subjects he does not have time or space to comment on.
Italy defaulted by devaluing the Lira from 110 Lira/dollar in 1949 to 1,800 Lira/dollar in 2002. Italian debt is over due for a fifty percent haircut.
Sure looks like the euro version of the Fed TARP, a very bad desperate measure to save Wall St. from their own folly at the expense of Main St.
Hi from Oz. For how much longer can this nonsense continue? I guess it depends on the ‘creativity’ of those in charge. It certainly doesn’t depend on the EC enforcing its ‘Directives’.
I think your missing the point Mish. Notice the amount of deposits relative to U.S. and think about it for a bit. For (according to FDIC) q3 2015 total U.S. deposits were 12 trillion dollars with 1.4 being foreign. So local deposits were ~10.6 trillion. France and Italy combined have 6.5 trillion euro or 7t dollars at 1.1 exchange. Theoretically one could say their population is almost twice as deposit rich as ours if you take population comparisons.
Two things come out if you think about dispersion of wealth it is probably greater in Europe so deposits are more concentrated. A lot of the deposits were probably numerically generated by monetary games so they are more fictitious in Europe than here. Ergo the marginal depositor does not care about guarantees in Europe because the marginal depositor is a computer somewhere in the ECB.
US Deposits: $12 Trillion
FDIC has: $60 Million to cover, or so i read
European bank problems will hit the US within 6 months. If you have money in a TBTF bank, withdraw most; leave just enough for Bill Pay. NIRP will be an insidious and covert tax; the banks will even charge for withdrawing from your own bank’s ATM. The agenda is total monetary control; it started when all government employees were forced to Direct Deposit paychecks, pensions,etc. Now is the time for PMs. The argument that they, in comparison, don’t pay a return is now invalid.
PM (precious metals) will be ruled illegal since they are what terrorists and drug dealers use. Good luck. Anyway, I’ ve been wondering why my illegal drug/gun dealer is demanding pre-65 Silver coin for all our illegal transactions. Same with my homies downtown. I can’t place any bets on March Madness unless I deal in Krugerrands. Odd. They tell me M-13 will only take “real money”…what ever that is.
Tony Bennett said:
US Treasury market is non discriminatory … welcomes one and all.
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I do not understand how it can get, nor stay, “bad”, when the ECB can issue unlimited credits to any Bank? Even if a loan is not paid back, the Bank suffers no “loss” since nothing of value was loaned out, only “credit”.
If the Bank took silver and or gold coin as deposit, loaned that out, and the borrower did not pay the silver or gold coin back, then the Bank would be in trouble with the depositor. BUT, the bank did not use any depositor coin, paper, notes, bills, etc. but created credit instead.
How can any of this create a problem for the banks? Inflation in the “currency” used, but how can a bank collapse?
Ron J said:
“It is a step towards a fully-fledged Banking Union to create a safer and sounder financial sector in the wake of the financial crisis.”
Safer and sounder could have been in existence all along. What happened in the 1920’s and 30’s isn’t some big mystery. The laws of math aren’t some big mystery.
The financial crisis in Europe and elsewhere isn’t some accident that now needs to be cleaned up so it doesn’t happen again. It shouldn’t have happened in the first place.
In the U.S., regulations were changed so that the financial crisis could be facilitated. Other regulations were simply ignored, so that the financial crisis could be facilitated.
Greenspan pretended to lament afterward, that he thought the bankers would have been more responsible. It was irresponsible for Greenspan to take the lending standard to ZERO, thus he set the irresponsibility standard for the bankers to follow. How can Greenspan pretend to lament, when he praised the bankers in 2005, for getting people into homes they could not afford? It has all been a gaming.
Ron J said:
“Are things “Really Bad” Enough?”
Not yet. Reform occurs after the collapse of the system.
“How Safe is Your Money?”
I closed my brokerage account with Fidelity a few years back because they required Fidelity Cash Reserves to be the sweep account and this MM fund was loaded with the European bank bonds such as BNP Paribas.
fidelity sweep is a list of about 8 banks. you can limit where your sweep goes if you contact them.