iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,447 Blog Posts

New ECB Tier One Capital Rules for Monte Paschi Spells Trouble For Deutsche Bank and Others

The Monte Paschi saga continues. If we lives in normal times, they’d like the rotten bank go bankrupt already. After all, the bank sucks. But since we live in an era of perpetual bailouts led by central banks, Monte Paschi gets to live and infect many others with its disease.

Yesterday the ECB announced new rules for Monte, demanding that the prospective Italian bailout of the bank bring its tier one capital up to 8% from the current -2.4%.

Jesus Christ.

Currently the legal minimum is 4.5%. If the ECB were to hold other European banks to the 8% standard, well then, at least 10 of them will need to raise new capital, including Deutsche Bank, Unicredit and Allied Irish.

“There’s a lot more to be explained,” said John Raymond, senior European bank analyst at CreditSights. “They just say, ‘Oh, this is needed to get to 8 percent,’ as if we all knew the number was 8 percent, when in fact that’s a completely new number.”

Monte Paschi needs to raise at least $9b, hardly any of which will come from the private sector. The Italian government will have to bail them out.

Based on the recent stress test, Allied Irish had a CET1 ratio of 4.3%, Deutsche Bank 7.8%, Unicredit 7.1%, Barclays 7.3% and Soc Gen 7.5%.

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5 comments

  1. gorby

    7.8 for $DB-better then I thought.

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  2. pb

    Look for an EUR rally soon…they won’t be able to print notes fast enough to stop it. In other news, “pie in the sky” schemes have equities looking toppy…IMO.
    http://www.reuters.com/article/us-amazon-com-airships-idUSKBN14I1NR

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  3. pb

    That is not to say that this market has “topped out”. I increasingly think that the very last bear must be skinned alive, a permanently high plateau mentality be prevailing, and an utter vacuum of buyers to the downside comes first.

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    • fallguystreet

      Some of the market has topped out. Some has bottomed out. I presume you know buy low sell high?

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  4. fallguystreet

    Just stay away from the 100 + P/E club and you’ll be fine. Real Estate has done nothing in years. Unheard of.

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