– Eurozone Funding Shortfall Rises To Over $4 Trillion, Increases By More Than $500 Billion In A Year (ZeroHedge, Aug 11, 2013):
Back in April 2012, Zero Hedge pointed out something rather disturbing for the European banking sector and defenders of the European monetary myth: the “aggregate shortfall of required stable funding Is €2.78 trillion” which was the number estimated by the BIS’ Basel III rules needed to return to some semblance of balance sheet stability in Europe. More importantly, this was a number so big, it was obvious that there was only one way to deal with it: cover it up deeply under the rug and pray it never reemerged.
What happened next was inevitable: Basel III’s implementation was delayed as there was no way Europe’s banks could satisfy their deleveraging requirements, while the actual capital shortfall hole became bigger and bigger. Today, 16 months later, the FT discovers what Zero Hedge readers knew long ago in “Eurozone banks need to shed €3.2tn in assets to meet Basel III.” In other words, not only has Europe not fixed anything in the past year, but the liquidity tsunami injected by the central banks merely taped over the epic capital shortfall that just got epic-er, increasing from €2.8 trillion to €3.2 trillion, an increase of half a trillion to over $4 trillion in one short year.
Sadly, just like back in April 2012, so now, Europe has no hope of actually addressing this much needed deleveraging and so the can kicking will continue until the number rises to $5 trillion, $6, $7 etc until one day the market’s “head in the sand” strategy finally fails and every emperor around the world is found to be naked.
Europe’s biggest banks will have to cut €661bn of assets and generate €47bn of fresh capital over the next five years to comply with forthcoming regulations aimed at reducing the likelihood of another taxpayer funded bailout.