Russian Depositors use loophole to take billions out of Cyprus

Another very disturbing piece of news has emerged today, it appears that large amounts of money in the order of billions have been withdrawn from Laiki and Bank of Cyprus during the one week blockade; should this be confirmed the hole in the two banks could be much larger than thought; which in exchange would guarantee a total wipe out of the two banks' deposits.
If the purpose of all this was to punish dirty Russian capitals in Cyprus well it seems it failed miserably.

From FAZ, Google translation edited:

Despite the closed banks and a lock for payments in the past week, more money flowed out of Cyprus than in previous weeks, Frankfurter experts report.

Prior to the escalation of the crisis in Cyprus accruing on the payment system targetting liabilities of Cypriot central bank to the European Central Bank (ECB) had increased daily at approximately 100 to 200 million euros. In the days after Parliament rejection of the stabilization program, the daily risk has risen to more than double.
Just in the last week so cash assets have been withdrawn from Cyprus in the billions, regardless of the fact the Cypriot central bank had issued a lock.

Cyprus Central Bank Board nonetheless left exemptions from capital controls
such as transfers for humanitarian aid reasons and "special payments", which are not defined in detail.
The unusually high outflows from Cyprus in recent days indicates that the central bank of Nicosia has interpreted this capital control rather liberally.

From Reuters:

While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped, other depositors used an array of techniques to access their money.

No one knows exactly how much money has left Cyprus' banks, or where it has gone. The two banks at the centre of the crisis - Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus - have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 percent of Russia's Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks' largest depositors.

Spain Bailout Disaster Explained

Spain is going to ask for a bailout this weekend and what will happen in the next weeks is open to much speculation, the nightmare of a contagion to a major Euro economy has happened and any possible amount set aside from the Euro funds will fall short for the now escalating Spanish crisis.

Let us check some figures on the Spanish mess:

• Total Spanish banking loans are equal to 170% of Spanish GDP.
• Troubled loans at Spanish Banks just hit an 18-year high.
• Spanish Banks are drawing a record €316.3 billion from the ECB (up from €169.2 billion in February).
• Spanish citizens are pulling their money out of Spain en masse: over €100 billion left the Spanish banking system in 2012 alone.
• Over HALF of all Spanish mortgages are owned by Spanish cajas.

 

Spain's housing bubble is the dark blue line below. The US is the gray one.



Cajas primary lending market during Spain's housing boom were subprime and sub-sub prime borrowers.
The entire Spanish banking system is saturated with toxic mortgage debt on a level that makes the US in 2008 looks like a minor incident.

In response to this Spain has just performed the largest bank nationalization in its history: Bankia.

Here’s a brief summary:

Bankia was formed in 2010 when the Spanish Government merged seven insolvent cajas. In plain terms, Bankia was a trainwreck waiting to happen.
However, both the bank itself and the Spanish Government decided to maintain a charade that the bank was in great form right up until it collapsed (only one month ago Bankia was talking about paying its dividend).
On May 9^th the Spanish Government stepped in to nationalize the bank. Its first step was to convert its (the Spanish Government’s) €4.5 billion worth of preferred shares to common shares, thereby taking a 45% stake in the bank.

The Spanish Government assured everyone that this move was adequate and that Bankia was solvent. Then Bankia announces €17 billion of new write-downs as well as €7 billion of mark-downs on investments. It also revised its 2011 results from a €309 million profit to a €3 billion LOSS.

It is true though that all major banks in the Western world are engaging in similar accounting practices to hide the true conditions of their balance sheets.


In Bankia’s case all of this culminated in the bank receiving a €19 billion Euro bailout, the largest in Spain’s history. And for certain this amount of money will be increased dramatically: Bankia’s loan book is roughly €200 billion in size (1/5^th the size of Spain’s GDP) and a major chunk of this is most probably garbage.

The real problem though is that Spain itself is broke and doesn’t have the money to bailout Bankia.

The Spanish stock market has been in a free fall for most of 2012 as Spain's banking system teeters on the brink of collapse.

 

If we look at Spain's LONG-TERM chart where the market has just broken a 15 YEAR TRENDLINE we are set for disaster.




I believe we have at most a month before Spain drags down other countries. The Spanish economy and banking system are too large to be bailed out and the IMF and ECB know this.

Moreover, worldwide banking exposure to Spain is well over €1 TRILLION.

EU banking system is leveraged at 26 to 1 (Lehman Brothers was leveraged at 30 to 1 when it collapsed).

Troubled times ahead for Europe.

Mafia is Italy's Largest Bank

According to a new report by Italian anti-crime group SOS Impresa, as reported by Reuters, "Organised crime has tightened its grip on the Italian economy during the economic crisis, making the Mafia the country's biggest "bank" and squeezing the life out of thousands of small firms, according to a report on Tuesday."
It is hardly surprising for those accustomed to the sorrow state of Italian affairs to find out that '"With 65 billion euros in liquidity, the Mafia is Italy's number one bank." 



From Reuters:

Organised crime groups like the Sicilian Cosa Nostra, the Naples Camorra or the Calabrian 'Ndrangheta have long had a stranglehold on the Italian economy, generating profits equivalent to about 7 percent of national output.

Extortionate lending had become an increasingly sophisticated and lucrative source of income, alongside drug trafficking, arms smuggling, prostitution, gambling and racketeering, the report said.

"The classic neighbourhood or street loan shark is on the way out, giving way to organised loan-sharking that is well connected with professional circles and operates with the connivance of high-level professionals," the report said.

It estimated about 200,000 businesses were tied to extortionate lenders and tens of thousands of jobs had been lost as a result.

Extortion - new vs old school:

Old style gangsters handing out cash in bars and pool halls had been replaced by apparently respectable bankers, lawyers or notaries, the report said.

"This is extortion with a clean face," it added. "Through their professions, they know the mechanisms of the legal credit market and they often know the financial position of their victims perfectly."

Small businesses, who have struggled to get hold of credit during the economic slowdown, may have been increasingly tempted to turn to the mafia, said the report.

Typical victims of extortionate lending were middle-aged shopkeepers and small businessmen who would struggle to find a new job and who were ready to try anything to avoid bankruptcy, it added.

"They are usually people in traditional retail sectors like food, greengrocers, clothes or shoe shops, florists or furniture shops. These are the categories which, more than any other, are paying the price of the (economic) crisis," it said.

Next up: a surge in prostitution, drugs, xenophobia, child labor, and all those great things that Italy thought it had managed to get away from, and which supposedly were no longer the mark of modern "civilized" society.