With Deutsche Bank mercifully missing from overnight headlines for the first day in almost two weeks, it is time to bring attention to Germany’s second largest bank which, as we first reported earlier in the week citing a Handelsblatt leak, confirmed it is also going through a historic rough patch. This morning, Commerzbank said it plans a wide-ranging business restructuring that includes scrapping the bank’s dividend for the rest of the year, terminating nearly 10,000 jobs – roughly 20% of its workforce – and merging two large units.
“The focus on the core business, with some business activities being discontinued, and the digitalization and automation of workflows will lead to staff reductions amounting to around 9,600 full-time positions,” Germany’s second-largest lender said.
While the market’s attention has been transfixed by the latest crash in the stock of Europe’s biggest bank, now that concerns about Deutsche Bank’s $2 trillion balance sheet have violently resurfaced, it is worth recalling that Germany’s “other” mega bank, DB’s smaller rival, Commerzbank, whose balance sheet is hardly looking much healthier, is planning to cut around 9,000 jobs over the coming years as Germany’s second biggest lender pushes ahead with a restructuring plan, Handelsblatt reported earlier today, citing unnamed sources in the finance industry.
The round of layoffs would eliminate a massive 18% of the bank’s entire workforce.
– S&P Downgrades Numerous European Banks, Warns Deutsche Bank May Be Next (ZeroHedge, Feb 3, 2015):
Just hours after apparently settling its suit with the USA (not at all retaliation for downgrading them), S&P has taken the big red marker out on a slew of European banks:
- Downgrades: Credit Suisse, Barclays, Lloyds, Bank of Scotland, RBS, HSBC, and Ulster Bank
- On Watch Negative: Raiffeisen Zentralbank, MBank, Unicredit, Commerzbank, and Deutsche Bank
The driver of the shift in perspective is the apparent removal of the ‘bailout put’, as the prospect of “extraordinary government support” appeared less likely under recently passed bail-in legislation.
Chinese Kids Driving Supercars: Inside the Secret Southern California Meet-up
Nov 18, 2014
China’s ultra-rich are growing in number and in wealth – and are sending billions of dollars out of the country. Much of it is landing up in the U.S. where many children of the wealthy elite are sent to get an American college education — and they’re living large. Vocativ found a sub-culture of these Chinese students in California. They drive luxury cars like Maseratis and Ferraris and flaunt their wealth at discreet private parties and in online groups, like “Super Cars in America”.
A decision by UK charity Save the Children to give Tony Blair its annual Global Legacy Award has unleashed a torrent of criticism highlighting the former PM’s role in Britain’s 2003 Iraq war and his controversial business dealings in the Middle East.
The former Labour leader, who is currently a key focus of a public inquiry into Britain’s invasion of Iraq, received the honor on Wednesday night at a star-studded gala hosted by the charity in New York.
Save the Children’s decision to offer Blair the award has provoked outrage across the UK, with critics insisting the move utterly discredits the charity.
With half the nation covered in snow, according to ABC, nowhere appears to have had it worse (or more suddenly) than upstate New York. As images pour in from lake-effect snow, to The Buffalo Bills stadium, and from scenes caught in a snow storm to pandas playing, we thought the following stunning drone’s-eye-view over Erie County was both incredible in its beauty and cruel in its GDP-destroying reality.
A Drone’s eye view of the beauty (and GDP cruelty) of a snow-buried upstate New York
For the second morning in a row, Jacksonville, Florida, dropped to a new record low.
With nasty cold fronts thrusting an icy and early winter across the continental U.S. — along with last winter described by USA Today as “one of the snowiest, coldest, most miserable on record” — climatologist John L. Casey thinks the weather pattern is here to stay for decades to come.
In fact, Casey, a former space shuttle engineer and NASA consultant, is out with the provocative book “Dark Winter: How the Sun Is Causing a 30-Year Cold Spell,” which warns that a radical shift in global climate is underway, and that Al Gore and other environmentalists have it completely wrong.
The earth, he says, is cooling, and cooling fast.
And yes, you read that one right:
Commerzbank, Germany’s second-largest bank, a toppling marvel of ingenuity during the Financial Crisis that was bailed out by ever dutiful if unenthusiastic taxpayers, will now reward these very folks with what Germans have come to look forward to: the Wrath of Draghi.
It started with Deutsche Skatbank, a division of VR-Bank Altenburger Land. The small bank was the trial balloon in imposing the Wrath of Draghi on savers and businesses. Effective November 1, those with over €500,000 on deposit earn a “negative interest rate” of 0.25%. In less euphemistic terms, they get to pay 0.25% per year on those deposits for the privilege of giving their money to the bank.
“Punishment interest” is what Germans call this with Teutonic precision.
The squat, wheeled machines move stocked shelves to workers
In its latest bid to boost productivity and speed delivery, Amazon.com Inc. is deploying a robot army.
The Seattle online retailer has outfitted several U.S. warehouses with squat, orange, wheeled robots that move stocked shelves to workers, instead of having employees seek items amid long aisles of merchandise, according to people familiar with the matter. At a 1.2-million-square-foot warehouse in Tracy, Calif., about 60 miles east of San Francisco, Amazon this summer replaced four floors of fixed shelving with the robots, the people said.
Now, “pickers” at the facility stand in one place and wait for robots to bring four-foot-by-six-foot shelving units to them, sparing them what amounted to as much as 20 miles a day of walking through the warehouse. Employees at some robot-equipped warehouses are expected to pick and scan at least 300 items an hour, compared with 100 under the old system, current and former workers said.
The robots are the fruits of Amazon’s 2012 purchase of Kiva Systems Inc. for $775 million. In May, Amazon Chief Executive Jeff Bezos told investors at Amazon’s annual meeting that he planned to deploy 10,000 Kiva robots by year-end, up from 1,400 at the time.
One really just can’t make this up. Perhaps the Fed inspector general, when he is done “fixing” the corruption at the NY Fed will be so kind to take a look at the Goldman takeover of the US judicial system next.
And the saddest thing: it cost the banks (and their lawyer lackeys) under a million to buy America’s judicial system off: American justice is not only for sale, it goes at firesale prices!
The most shocking, if already completely buried, news of the day was that – in yet another confirmation that Goldman Sachs is in charge of the New York Fed – a NY Fed staffer was colluding and leaking confidential, material information to a 29-year-old Goldman vice president, himself a former Federal Reserve employee. This only happened because on the day Carmen Segarra disclosed her 47 hours of “secret Goldman tapes” on This American Life, Goldman executives asked the former Fed staffer where he had gotten what appeared to be confidential information from. To nobody’s surprise the answer was: The New York Fed. So as the latter, also known as the biggest hedge fund of the western world with $2.7 trillion in AUM, is scrambling to once again prove it is shocked, shocked, that it has become merely the latest subsidiary of Goldman Sachs, Inc., it released the following statement explaining what “really” happened.
Two months ago, to much fanfare by the progressive community, HHS, if not Dr. Jonathan Gruber, were delighted to report that as of August 15, Obamacare enrollment had hit 7.3 million sign ups, well above the 7.0 million goal. Then a week ago we learned that “projection mistakes were made” after the “Obama administration revised its estimate for Obamacare enrollment, now saying – with the bruising midterms safely in the rearview mirror – that it expects some 9.9 million people to have coverage through the Affordable Care Act’s insurance exchanges in 2015, millions fewer than outside experts predicted.” Fast forward to today when moments ago Bloomberg reported, that “the Obama administration included as many as 400,000 dental plans in a number it reported for enrollments under the Affordable Care Act, an unpublicized detail that helped surpass a goal for 7 million sign-ups.“
The Dutch government has refused to reveal details of a secret pact between members of the Joint Investigation Team examining the downed Flight MH17. If the participants, including Ukraine, don’t want information to be released, it will be kept secret.
“While the general population is aware something is seriously wrong, people remain extremely confused about the root of the problem. This is because what’s happening all around us isn’t socialism and it isn’t free market capitalism. It is actually a return to something much more ancient and much more oppressive. It is a return to serfdom, neo-fedualism and oligarchy.”
A sinkhole 20 by 30 meters (65 by 98 feet) in size has been found near a Uralkali mine in Russia’s Perm region. While the company says the development is of no further threat, locals fear the whole nearby town could go underground.
— Насонов Кирилл (@nasonovkirill) November 20, 2014
The topic of ‘currency war’ has been bantered about in financial circles since at least the term was first used by Brazilian Finance Minister Guido Mantega in September 2010. Recently, the currency war has escalated, and a ‘sanctions war’ against Russia has broken out. History suggests that financial assets are highly unlikely to preserve investors’ real purchasing power in this inhospitable international environment, due in part to the associated currency crises, which will catalyse at least a partial international remonetisation of gold. Vladimir Putin, under pressure from economic sanctions, may calculate that now is the time to play his ‘gold card’.
A BRIEF HISTORY OF THE CURRENCY WAR
RUSSIA, NATO AND THE ‘SANCTIONS WAR’
SO, WILL PUTIN PLAY THE ‘GOLD CARD’?
Why is there this huge discrepancy between the value of gold and silver reported recovered, and the value reported to have been stored in the vaults? There are a number of possible explanations, from outright theft using the attack as cover, to insurance fraud. Until there is a genuine investigation that probes all the relevant facts and circumstances surrounding the attack, we can only speculate.
For the first time since it began collecting data in 1994, Kantar Worldpanel, the market researcher, reported a decline in UK grocery sales by value, as The FT reports the biggest UK grocers were “losing market share hand over fist,” as analysts warn “there are phoney price wars, and there are real price wars. This is a real price war.” This comes on the heels of Goldman report claiming 20% of British grocers are surplus to requirements. But it’s not just Britain… in the the cleanest dirty shirt world-economic-growth supporting decoupled economy of the USA, Reuters reports Dollar General may need to divest more than 4,000 stores to win approval from the U.S. Federal Trade Commission for its acquisition of Family Dollar.
Autonomous “Robocop”-style robots, equipped with microphones, speakers, cameras, laser scanners and sensors, have started to guard Silicon Valley.
The security robots, called Knightscope K5 Autonomous Data Machines, were designed by a robotics company, Knightscope, located in Mountain View, California.
The robots are programmed to notice unusual behavior and alert controllers. It also has odor and heat detectors, and can monitor pollution in carpets as well. Last but not least: with cameras, the Robocops can remember up to 300 number plates a minute, monitoring traffic.
This problem extends into the oligarchy of globalists, who adore the theories expressed in Plato’s “The Republic,” in which an elite cadre of “philosopher kings,” men who have achieved a heightened level of academic knowledge, are exalted as the most qualified leaders. However, leadership requires more than knowledge, even if that knowledge is profound. Leadership also requires compassion and informed consent, two things for which the elites have no regard.
The Internal Revenue Service reportedly wants London Mayor Boris Johnson to write a check for taxes he owes to the United States government, but the UK politician says he isn’t paying.
Those ‘brilliant’ Japanese ‘visionaries’ never heard of Fukushima:
Will people ever live in underwater cities? Japanese construction firm says it is possible by 2030. The visionaries revealed a $25 billion deep-sea eco-city plan called Ocean Spiral for 5,000 people that will produce energy from sea resources.
Many have pondered the idea of living under the sea while sci-fi film directors such as George Lucas tempted our imagination with stunning images of underwater cities. Such was the Gungan city consisting of a mass of hydrostatic bubbles shown in the first part of the “Star wars” epic space film series.
Now a Japanese construction firm Shimizu Corp. says that building an underwater residential area is not a fantasy and aims to build one by 2030 – in just 15 years.
The head of the National Security Agency warned Congress on Thursday that China and “one or two” other nations currently possess the capability of crippling the American power grid through cyberattacks.
It has become quite clear that the Fed neither has the intention, nor the market mechanism to do any of that, and certainly not in a 3-6 month timeframe. Which may explain the Fed’s hawkish words on any potential surge in market vol. After all, if the nearly $3 trillion in excess reserves remain on bank balance sheets for another year, then the only reason why vol could surge is if the Fed lose the faith of the markets terminally. At that point the last worry anyone will have is whether and how the Fed will tighten monetary policy.
It is still far too early to call a turn in the long-term trend of initial jobless claims but this is the 5th week that new lows have not been made, 4th miss in a row, and (despite last week’s upward revision) claims sit at 2-month highs. Initial claims printed 291k (against 284k expectations) down very slightly from an upwardly revised 293k last week. However, continuing claims continue to tumble to fresh cycle lows at 2.33 million (below expectations and well down from last week’s jump).
Ugly data in Asia, Europe, and US PMI meant US equities opened gap-down… that was unacceptable to ‘someone’ and so the “most shorted” names were squeezed. However, after 10 minutes the ramp started to fade… and so the big boys ‘fat-fingered’ VIX and that rescued the dip. That would be fine… but it happened again at 958ET when stocks started to fade again and suddenly VIX was lit up and zoom… stock momentum was ignited and all was well in the world… Broken record? Yes! But clearly someone has to take note of this rigging…
“I’ve seen ice like this or even worse, but it’s usually not until the middle of December,” says lockmaster.
Game 9 – 2014 World Chess Championship – Magnus Carlsen vs Viswanathan Anand
WTF: A Night With Japan’s Highest Paid Male Gigolo
– US Set To Alienate Angry Germany Next, As Crackdown Shifts From BNP To Commerzbank, Deutsche Bank (ZeroHedge, July 8, 2014):
As we reported over the weekend in “By “Punishing” France, The US Just Accelerated The Demise Of The Dollar“, following the record $9 billion fine against French BNP, the outcry has been fast and furious, with virtually everyone in the local chain of command, from the CEO of Total to the head of the Bank of France (and ECB member) Christian Noyer, all saying that the US is now clearly abusing the reserve power of the dollar and it is time to move away from a dollar-based reserve currency (how that jives with concurrent French demands for a lower EUR is a different, incomprehensible matter entirely).
It appears that having pushed France forcefully into the Russia-China Eurasian, and anti-US camp, the US will now do the same with Germany. Because after infuriating the German population by first refusing to return their gold contained (the legend goes) at the New York Fed, and then with scandal after spying scandal, most recently involving the CIA directly soliciting a German double agent, now the time has come to “punish” Germany’s largest banks for the same kind of money laundering that BNP was engaged in. As the NYT and Reuters report, the time has come to shift away from the BNP scandal and focus on what will soon be the Commerzbank and Deutsche Bank fallout.
According to the NYT, the money laundering crackdown is “bound for another European financial center: Germany. State and federal authorities have begun settlement talks with Commerzbank, Germany’s second-largest lender, over the bank’s dealings with Iran and other countries blacklisted by the United States, according to people briefed on the matter. The bank, which is suspected of transferring money through its American operations on behalf of companies in Iran and Sudan, could strike a settlement deal with the state and federal authorities as soon as this summer, said the people briefed on the matter, who were not authorized to speak publicly.
The contours of a settlement, which the authorities have only begun to sketch out, are expected to include at least $500 million in penalties for Commerzbank, the people added. Although prosecutors were still weighing punishments, the people briefed on the matter said that the bank would most likely face a so-called deferred prosecution agreement, which would suspend criminal charges in exchange for the financial penalty and other concessions.
It’s not just Commerzbank – a settlement with the smaller bank will merely pave the way for the punishment of the biggest bank of all (in terms of groiss derivative notional held): Deutsche Bank.
A potential deal with Commerzbank — which is expected to pave the way for a separate settlement with Deutsche Bank, Germany’s largest bank — would pale in comparison to the case announced last week against France’s biggest bank, BNP Paribas. The French bank agreed to pay a record $8.9 billion penalty and plead guilty to criminal charges for processing transactions on behalf of Sudan and other countries that America has hit with sanctions, a rare criminal action against a financial giant.
As NYT adds, correctly, “The Commerzbank investigation features an added twist: The bank is 17 percent owned by the German government. It is unclear whether — as in the BNP case, which led French authorities to intervene on the bank’s behalf — the settlement talks could inflame diplomatic tensions between Washington and Berlin.”
Of course, since this is the ridiculous “scorched earth” diplomatic policy, if one may call it that, of the Obama administration, nobody is surprised any more that the US president is alienating one former ally after another.
As we first observed a few weeks ago when we revealed JPM’s involvement in all of this money laundering, “some critics have questioned why American authorities have set their eye on European banks. The answer, authorities say, is that American banks by and large avoided processing transactions for Iran and Sudan. But American banks are not immune from touching dirty money. Citigroup’s Banamex unit is under investigation for processing money linked to a drug cartel. And in January, JPMorgan Chase reached a roughly $2 billion deal with the authorities over ignoring signs of the Ponzi scheme orchestrated by Bernard L. Madoff, who held accounts at the bank for over two decades.”
Not only that but as we wrote over the weekend, the bank that was instrumental in facilitating BNP’s money laundering for nearly a decade was none other than JPM. One wonders if JPM also “unwittingly” was the bank that made German money laundering around the globe possible. Did we mention unwittingly?
Still, while one can debate the idiocy of US foreign policy, eager to push European allies into the willing hands of Russia and China at the worst possible moment, when regional and civil wars and conflicts are suddenly breaking out across all key geopolitical hotspots, one wonders: in the case of BNP, the “fine” was as a result of French unwillingness to halt the Russian amphibious warship deal despite US demands. So it would be curious just what the US blackmail against German banks is for: one really does wonder just what punishment Angela Merkel deserves behind the scenes in the eyes of John Kerry et clueless al, to punish her and Germany so blatantly for the entire world to see.
One thing is clear: if the US thinks that Germany will continue to consider America its BFF and make zero contingency plans for when the alliance with the US finally crashes and burns, it will be truly surprised when the Eurasian alliance of Russia and China finally announces its final, all-important, missing link member: the manufacturing and export powerhouse that is Germany itself.
– Moody’s Downgrades Six German Bank Groups, And Their Subsidiaries, By Up To Three Notches (ZeroHedge, June 5, 2012):
First Moody’s cut the most prominent Austrian banks, and now it is Germany’s turn, if not that of the most undercapitalized German bank yet: “The ongoing rating review for Deutsche Bank AG and its subsidiaries will be concluded together with the reviews for other global firms with large capital markets operations.“
The full downgrade Matrix:
Moody’s takes multiple actions on German banks’ ratings; most outlooks now stable
Frankfurt am Main, June 06, 2012 — Moody’s Investors Service has today taken various rating actions on seven German banks and their subsidiaries, as well as one German subsidiary of a foreign group. As a result, the long-term debt and deposit ratings for six groups and one German subsidiary of a foreign group have declined by one notch, while the ratings for one group were confirmed. Moody’s also downgraded the long-term debt and deposit ratings for several subsidiaries of these groups, by up to three notches. At the same time, the short-term ratings for three groups as well as one German subsidiary of a foreign group have been downgraded by one notch, triggered by the long-term rating downgrades.
Message to the people of Greece:
Got physical gold and silver? Protect yourself from any devaluation threat NOW.
Luckily for those who held their “money” in the form of gold and silver, they just got an instantaneous 56% value preservation and a relative boost in their purchasing power with just one central bank announcement.
– Commerzbank’s Mueller Recommends Greece Exit Euro Zone – Report (FOX Business/Dow Jones Newswires, Jan. 31, 2012):
FRANKFURT – The Supervisory Board Chairman of Germany’s Commerzbank (CBK.XE) said he recommends that Greece leaves the euro zone, according to a pre-release of an interview by TV broadcaster Deutsches Anleger Fernsehen.
“I am strongly convinced that Greece needs a massive devaluation which it can’t carry out within the euro,” Mueller is quoted as saying, and “we can’t compensate for this with transfer payments.”
“Despite being a hurting process, I think Greece would be better advised to declare its exit,” as “Greece can’t be rescued within the euro,” Mueller said, according to the German broadcaster.
“Markets will understand, that, if Greece exits, this doesn’t mean who is next,” so he doesn’t expect contagion, Mueller is quoted as saying.
Banks could write down their entire exposure to Greece immediately, Mueller said, according to DAF.
“When you are at 70% or 80% and you’ll likely have to add to it, you can ask if you won’t stop it immediately, meaning write down entirely,” he is quoted as saying.
– Commerzbank CEO Says Greece Should Exit Eurozone (ZeroHedge, Jan. 30, 2012):
As if Merkel did not make it all too clear over the weekend that Germany no longer wishes Greece to be part of the Eurozone, and that the ball is now in Athens’ court to accept what is a glaringly unfeasible demand, i.e., to hand over fiscal sovereignty over to “Europe” with Merkel having the cover of saying it did everything in its power to keep Greece in the union, here comes Commerzbank’s CEO Mueller to pick up where Merkel left off:
- COMMERZBANK’S MUELLER SAYS GREECE SHOULD EXIT EURO ZONE
- COMMERZBANK’S MUELLER SPOKE TO DEUTSCHES ANLEGER FERNSEHEN
Presumably this means that German banks have sold off all their Greek bond exposure, and believe that the Eurozone would be better off without Greece in it. However, that Commerzbank, or one of the most insolvent banks in Europe, and only in line with Dexia, is confident that it can withstand the contagtion that would follow, only makes us even more skeptical that a Greek default and Eurozone departure will be contained, and in all likelihood will have scary implications for all European banks, not only German ones. Just ask DB’s Ackermann…
– Eurozone debt crisis: Markets dive on Greek referendum (BBC News,Nov. 1, 2011):
US and European markets have fallen following Monday’s announcement of a Greek referendum on the latest aid package to solve its debt crisis.
Eurozone leaders agreed a 50% debt write-off for Greece last week as well as strengthening Europe’s bailout fund.
But the Greek move has cast doubt on whether the deal can go ahead.
New York’s Dow Jones ended the day 2.5% lower, after a mid-afternoon rally on hope that Greek MPs may block the referendum proved short-lived.
One of Mr Papandreou’s MPs, Milena Apostolaki, resigned from the ruling Pasok parliamentary group on Tuesday, leaving the government with a two-seat majority in parliament.
Six other party members have called for Mr Papandreou to resign, according to the state news agency.
There are doubts whether the government will last long enough to hold the referendum, pencilled in for January.
A confidence vote is due to take place in the Greek parliament on Friday.
Earlier in the day, London’s FTSE 100 had ended trading down 2.2%, while the Frankfurt Dax fell 5% and the Paris Cac 40 some 5.4%.
Shares in French banks saw the biggest falls, with Societe Generale down 16.2%, BNP Paribas 13.1% and Credit Agricole 12.5%.
Other European banks also fared badly for the second day, with Germany’s Commerzbank and Deutsche Bank and the UK’s Barclays and Royal Bank of Scotland all 8% to 10% lower.
In the US, Bank of America fell 6.3%, while Morgan Stanley was down 8% at the close of trading.
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. 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)
Back in March of 2009 Zero Hedge, once again a little conspiratorially ahead of its time, solicited reader feedback on a key topic: CDS pricing manipulation, involving in addition to key cartel banks, such “independent” pricing services as MarkIt. We said: “Zero Hedge has received some troubling info (like there isn’t enough) regarding major pricing discrepancies between certain securities pricing services.
The services include companies such as IDC, Advantage Data, Markit and others. While I will not disclose which one may be a culprit, the allegation is that one (or more) are providing substantially above market pricing levels, specifically as pertains to distressed securities.” Then back in August 2010, we followed up by explaining that it is the ongoing price manipulation scheme, in addition to other factors, that allows Goldman Sachs (and other CDS dealers to a much lesser extent) to constantly generate massive profits from trading an opaque off-exchange product like CDS. It took two years and a month for others to take notice of this inquiry, although naturally not in that slum of corruption and market manipulation, the United States of America, but in Europe. Bloomberg reports: “Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and other 14 other investment banks face a European Union antitrust probe into credit-default swaps for companies and sovereign debt, regulators said. …The European Commission said it opened two antitrust probes. It will check whether 16 bank dealers colluded by giving market information to Markit, a financial information provider.” So while some post flow charts explaining the hilarity behind conspiracy theories, others actually expose the facts that today are a conspiracy and tomorrow are a full blown criminal investigation.
From Bloomberg Apr 29, 2011:
“Lack of transparency in markets can lead to abusive behavior and facilitate violations of competition rules,” said the EU’s antitrust chief, Joaquin Almunia, in an e-mailed statement. “I hope our investigation will contribute to a better functioning of financial markets.”
Global regulators have sought to toughen regulation of credit-default swaps saying the trades helped fuel the financial crisis. Lawmakers in the EU plan to encourage the use of clearinghouses and transparent trading systems. CDS are derivatives that pay the buyer face value if a borrower defaults.
JPMorgan, Bank of America Corp. (BAC), Barclays Plc (BARC), BNP Paribas (BNP) SA, Citigroup Inc. (C), Commerzbank AG (CBK), Credit Suisse Group AG (CSGN), Deutsche Bank AG (DBK), Goldman Sachs, HSBC Holdings Plc (HSBA), Morgan Stanley, Royal Bank of Scotland Group Plc (RBS), UBS AG (UBSN), Wells Fargo & Co. (WFC), Credit Agricole SA (ACA) and Societe Generale (GLE) SA will be investigated for possible collusion in giving “most of the pricing, indices and other essential daily data only to Markit.”
18 Feb. (Bloomberg) — German banks’ subordinated debt securities valued at 24 billion euros ($33 billion) were downgraded by Moody’s Investors Service on the prospect that new legislation will increase the risk of losses among debt holders.
Moody’s cut the ratings of lower Tier 2 notes, a layer of debt that’s subordinated by coming behind senior bonds in the queue for repayment after a bank collapses. Like other governments seeking to ensure creditors pay up before taxpayers have to contribute, German law now removes the protection Tier 2 bonds enjoyed from the authorities’ preference for saving lenders before they fail.
“The new legislation materially reduces the likelihood of government support for LT2 securities and therefore took out the state support uplift,” BNP Paribas SA analysts Olivia Frieser and Ivan Zubo wrote in a note to clients today. “The downgrades are as harsh as we had expected, which may weigh on sentiment.”
The cost of insuring German bank debt rose, according to CMA prices for credit-default swaps. Contracts on the subordinated debt of Deutsche Bank AG jumped 12 basis points to 160, the highest in five weeks. Swaps linked to Commerzbank AG’s junior debt climbed 25 basis points to 450 and senior contracts rose 10 to 190.
Seventy-two City bankers are suing Dresdner Kleinwort and Commerzbank for €33m ($47.8m) worth of unpaid bonuses in the biggest case of its kind in the UK.
The lawsuit, filed on Tuesday in the High Court, is the latest sign that bankers are ready to fight for their pay packets in spite of public outrage over the size of the rewards on offer in an industry widely blamed for the financial crisis.
An additional 25-30 former employees at Dresdner, which was bought by Germany’s Commerzbank late last year, are expected to file a separate suit in the coming weeks.
250 Dresdner Kleinwort bankers are preparing legal action to recover tens of millions of pounds of bonus payments
As many as 250 Dresdner Kleinwort bankers are preparing legal action to recover tens of millions of pounds after the German bank’s new owner reneged on bonus payments.
Several of the bankers, who worked for Dresdner Kleinwort in the City of London until it was sold to Commerzbank in September, are claiming bonuses in excess of £1 million with the disputed payments totalling around £50 million.
FRANKFURT, Jan 17 (Reuters) – Major German banks have so far written off only around a quarter of the nearly 300 billion euros ($397.7 billion) in toxic U.S. assets on their books, Der Spiegel magazine reported, citing a survey of 20 big lenders.
That means banks face more huge losses as they mark down the value of U.S. assets backed by mortgages and student loans, the magazine said on Saturday, reporting on a study prepared for the government by the Bundesbank and markets regulator BaFin.
Deutsche Banken sitzen auf Giftpapieren in Milliardenhöhe (Spiegel Online)
The finance ministry in Berlin assumes that the entire German banking sector is carrying around 1 trillion euros of risky assets on its books, the magazine said.
A spokeman for the Finance Ministry said it believed banks still had “significant amounts” of risky assets but declined to confirm the figures in the report.
The taxpayer looting and unsustainable debt creating ‘Paulson-Bernanke-Brown’ virus spreads rapidly around the world. Even financially relatively sound countries are now affected. ‘Sound economics’ resistance is now at close to 100%.
Critic of UK’s ‘crass Keynesianism’ offers package of tax cuts and state spending
Angela Merkel will make her sharpest political U-turn since becoming German Chancellor this week when her government unveils a €50bn (£44bn) package of tax cuts and incentives to protect Europe’s biggest economy from deepening recession.
The “Pact for Germany” programme contains a battery of tax cuts, health insurance reductions and special government funds designed to stimulate an economy forecast to contract by 3 per cent this year.
The measures, expected to be agreed at a crisis cabinet meeting tomorrow, will be announced only weeks after Mrs Merkel’s grand coalition government heaped scorn on Britain for “tossing around billions” in its efforts to tackle the credit crunch.
Germany’s Finance Minister, Peer Steinbrück, went so far as to condemn Gordon Brown’s VAT cuts as “crass Keynesianism” and said that it would take Britain a “whole generation” to work off the debt. Mrs Merkel insisted that spending one’s way out of recession did not work. (Absolutely correct!)
Yesterday, however, Mr Steinbrück announced plans to slash the basic tax rate from 15 to 12 per cent to persuade poorer families to keep spending.
* Germany to take 25 pct stake in Commerzbank
* Commerzbank gets extra 10 bln euros of capital
* Allianz bolsters Dresdner capital by 1.45 bln euros
* Purchase of Dresdner to close within days
FRANKFURT, Jan 8 (Reuters) – Germany is taking a stake of 25 percent plus one share in Commerzbank (CBKG.DE) in return for an additional 10 billion euro ($13.6 billion) capital injection, the country’s second-biggest listed bank said on Thursday.
It is the first time Berlin has partially nationalised a major bank in response to the global financial crisis and follows similar moves by London and Washington. Commerzbank will get a total of 18.2 billion euros in state capital plus 15 billion in guarantees.
“We are weatherproofing our bank for an economically stormy environment,” Chief Executive Martin Blessing said in a statement.
Nov. 8 (Bloomberg) — Allianz SE, Europe’s second-biggest insurer by market-value, posted a 2 billion-euro ($2.6 billion) loss and said it may miss operating profit forecasts for this year and next because of the turmoil in financial markets.
Allianz had a net loss including discontinued operations in the third quarter, compared with net income of 1.9 billion euros a year earlier, the Munich-based insurer said in a statement today. That was less than the 3.85 billion-euro estimate of 14 analysts surveyed by Bloomberg. Net income from continuing operations, which reflects the sale of Dresdner, was 545 million euros, the company said, missing analysts’ estimates of 782 million euros.
“Without a major equity market recovery, the operating profit outlook of 9 billion euros before banking for this year and next year cannot be reached,” Allianz Chief Financial Officer Helmut Perlet said in the statement.
Allianz, led by Chief Executive Officer Michael Diekmann, agreed on Aug. 31 to sell Dresdner Bank to Frankfurt-based Commerzbank AG for cash and stock. Commerzbank shares lost about 40 percent of their value in the month ended Sept. 30. Discontinued operations, which reflect the sale of Dresdner effective from Sept. 1, accounted for “transaction-based impairments according to IFRS 5” of 1.4 billion euros as well as for a net loss of 1.2 billion euros from Dresdner’s operations, Allianz said.
NP Paribas Chief Executive Officer Baudouin Prot speaks during a news conference to announce the bank’s third-quarter results in Paris November 5, 2008.
PARIS (Reuters) – A raft of European bank results did little to lift gloom around the sector on Wednesday, with a recurring trend of falling profits and rising bad debts stemming from the global financial crisis.
France’s biggest bank BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) posted a 56 percent fall in third-quarter profits, Allied Irish Banks (ALBK.I: Quote, Profile, Research, Stock Buzz) cut its earnings forecast, and Greece’s Emporiki Bank (CBGr.AT: Quote, Profile, Research, Stock Buzz) swung to a loss.
Capital rebuilding continued in the face of a tough outlook as Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) looked to raise up to 3 billion pounds ($4.7 billion) from a government-backed bond, and Austria’s Raiffeisen Zentralbank said it may ask the government for 2 billion euros ($2.6 billion).
By 7:15 a.m. EST the DJ Stoxx banking index was down 0.7 percent, led by 4 percent falls for BNP and Allied Irish.
Profits have tumbled across the sector, and several banks have warned of more writedowns and rising bad debts this year, though there is optimism that government rescue packages have left balance sheets strong enough to withstand more losses.
The French state has threatened to seize control of the country’s banks and fire top staff unless they do their part to stabilise the economy by stepping up lending to companies in need.
“The banks have got to open up credit to business: they have the means to do it,” said prime minister Francois Fillon, accusing lenders of hoarding cash. “We don’t think the banks are stepping up to task as necessary. We can withdraw the credit that we have extended to them under the state’s contract with the banks, and that will put them in difficulty. At that moment the question arises whether we should take an equity stake, change their managers, and assume control over their strategy.”
Speaking on French television, he warned: “Broadly speaking, we’ll be able to judge over the next 10 days whether they are playing the game as they should, or not.”
Commerzbank, Germany’s second-largest bank, today said it would accept a €8.2bn (£6.44bn) capital injection from the state and a further €15bn in guaranteed funding.
Commerz, which is taking over Dresdner, its smaller rival, said it had agreed to pay no dividends for the next two years. It will also scrap all boardroom bonuses in 2009 and 2010 and cap its chief executive’s salary at €500,000.
The bank made its moves as it reported a net loss of €285m in the third quarter when it was heavily exposed to both Lehman Brothers, the bankrupt US investment bank, and Iceland, the virtually insolvent country.
It said it made a combined operating loss of almost €900m through these two events. In the first nine months its pre-tax earnings of €2.3bn a year ago shrank to €419m.
Germany’s private sector banks have been under considerable pressure from chancellor Angela Merkel to join her government’s €500bn stabilisation package, with the biggest, Deutsche, creating a storm by saying it would be “ashamed” to take part.