“Hurdy-gurdy-hurdy-gurdy” says ECB’s Stefan Ingves
Influential observers also concerned about growing ECB commitments
The Slog can confirm that in the last 48 hours, there has been a concerted lobbying campaign – carried out in Brussels, London and Frankfurt – aimed at an urgent relaxation of EU regulators’ rules on ‘safe-asset’ sandbagging by hard-pressed private eurobanks.
Outline discussions have also taken place between key banking figures and the European Central Bank (ECB) as a further means of putting pressure on European authorities about the matter.
A Swiss-based lending executive told me last night, “There is real fear out there now. Some outfits are caught out, in that they can’t offload all the assets they need to for compliance, and they can’t attract new funding. So naturally, they want the rules changed. It was bound to happen sooner or later”.
Senior Brussels regulators and the ECB have met a couple of times so far, and are now weighing the pros and cons of relaxing the buffer rules.
“They will try to disguise this,” the source continued, “and I guess they will have to make exceptions, or invent new asset definitions. But we all know what happens when you let these guys get flakey about what is and isn’t an asset.”
Too true. EU booby Jose Manuel Barrosso brought in the new rules last October, and by the 28th of that month Stefan Ingves, chairman of the Basel Committee on Banking Supervision, told the media that the 9% cast-iron “real valuation” rule meant that “something very different and extraordinary that we don’t know about today, must happen for 9% not to be enough”. A lot of new events have of course occurred since then – and anyway, I personally think 9% would be nowhere near enough now. But to have the 9% crammed with Aunt Tabitha’s hoarded Deutschmarks and other gold-plated ‘assets’ would be asking not so much for trouble as for banks to blow over within hours rather than weeks. Maybe this therefore doesn’t matter, but frightened folks can do more in a week than they can in an hour. Except for the Greek debt negotiators, of course.
The mildly amusing bit about Stefan’s comfort with a 9% level is that by 11th November last, he confirmed that in his own country Sweden, the level would be raised above the EU recommendation. (Hear not what they say, but watch what they do).
The bottom line – the symptom – is the main point this first post of today is making. We have already thrown $3.2 trillion at eurobank liquidity, the banks want another $1trillion from the next LTRO auction, and now we have reliable evidence that banking lobbyists are hammering at the back door in a vain attempt to carry on looking kosher.
There are also mutterings (but nothing I’d call solid yet) that SuperMario of the ECB has been chucking a lot of money at the euro itself – but via less than normal apertures, shall we say. I did look at the overnight $/Euro rate first thing this morning – and although the line is shaky, it is being held at roughly 76 eurocents to the US Dollar. Since early January, the common currency had been falling steadily; so as there is still no news from the one day/step/week/tiny last clause Greek debt-swap marathon to support confidence in the euro, you have to wonder whether the gossips might well be right on the money.
Certainly, some heavy-hitting Swiss gnomes are worried by yet another flight to their now officially pegged currency – at a given rate between the CHF and the euro now, Zurich intervenes to make its currency cheaper. But this could turn into a very expensive operation before too long.
Meanwhile, more evidence is emerging that Berlin is pressuring some German banks NOT to borrow any more in the ECB’s next round of LTRO – on the grounds that this is a time for piling the sandbags high, not lending. Of course, if you’re in the middle of an embarrassing economic boom (while telling everyone else to tighten belts) lending liquidity in the real economy is not really one’s problem. It does give Mario Draghi less of a problem when it comes to funding private bank requirements that are three times bigger than he anticipated…but a bigger one when it comes to persuading the banksters they should be lending to business hahahahaha, my God did I really say that?
Germany aside, the other big worrying syptom here is the continuing process of emptying the ECB, and replacing clean money with yet more long half-life radioactive loan bonds or assorted other crap. A good hunt around the ECB’s may yield something…..but don’t bank on it: since Mario took over, the page marked ‘Open Market Operations’ has miraculously disappeared from the Monetary Policy section. Fancy that.
The Slog 