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Banks Bracing for 2012 Euro Financial Apocalypse

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posted on Nov, 17 2011 @ 10:04 PM

As the European debt crisis threatens to spiral out of control, banks are scrambling behind the scenes to protect their balance sheets and hedge their exposure to ride-out an increasingly scary 2012.

But while some of the moves may help mitigate the losses from Armageddon, market watchers say certain financial insurance policies — particularly credit default swaps on sovereign debt — may not work in a new financial crisis.

Banks are loading up on hedges against a possible European financial collapse. The notional amounts outstanding of over-the-counter derivatives rose 18 percent in the first half of 2011 to $708 trillion as of June 2011, a record high, according to a report by the Bank of International Settlements released Wednesday. In the second half of 2010, the notional value rose only by 3 percent.

Over the counter derivatives are private agreements between parties, different from derivative contracts that are traded through exchanges. The notional value of contracts provides a measure of market size, but not the actual measure of the value that is at risk among participants.

"Given all the increased volatility — the unusual conditions with the dollar and the euro, the debt crisis in Europe, the debt problems of the U.S. — you are seeing an increase in hedging," says Steve Wyatt, professor and Chair of the Finance Department at the Farmer School of Business at Miami University, Ohio. "The more astute observers in the market have come to the conclusion that the ECB will not buy enough paper to change the market view on this because of inflation fears. The only way out of this is fiscal integration or some modification of the membership in the Euro. That is not going to be quick or clean. That is the risk participants are hedging against."

Here's a quick snapshot of their exposure and hedges purchased, according to latest disclosures.
Citigroup has a net funded exposure to Greece, Italy, Ireland, Portugal and Spain of about $7.2 billion. That figure has been arrived at after netting out hedges worth $9.2 billion and margin and collateral of about $4.1 billion. In addition, Citi has $9.2 billion in unfunded commitments to the region.

Morgan Stanley said it had $2.1 billion in net exposure to the troubled five countries and $5.7 billion in gross exposure.
Goldman Sachs ha
s a gross exposure of $4.16 billion and a net exposure of $2.46 billion.

Bank of America has a gross exposure of $14.6 billion and has purchased credit protection worth $1.65 billion

JPMorgan Chase has a gross exposure of $20.3 billion and a net exposure of $15.1 billion after netting hedges worth $5.2 billion.

Ho ho ho Merry Christmas! Here is the latest iteration of mass media end-of-the-world apocalyptic news. So basically what it is saying is that banks are scrambling to hedge against a European financial collapse, but that such evasive action cannot avert risk from such a meltdown where sovereign debts are involved. So banks in Europe and the US, and probably other parts of the world, will likewise feature among the fallout of a European financial collapse. Pretty cool eh?

posted on Nov, 17 2011 @ 10:07 PM
The contageon would be severe and instant. Interestingly, the Japanese banks might come out the best of all since they have the least exposure to this garbage of any major banks.

They will find some way to pretend its not happening, by simply lying about the numbers. But to do this means somebody gets hurt. Who gets the hot potato? Why, taxpayers as usual, most likely.

posted on Nov, 17 2011 @ 10:08 PM
Sorry double post, my comp was lagging so I added another para and hit the submit button again and well two threads appear.

Please delete this one. Thanks

posted on Nov, 17 2011 @ 10:11 PM

Originally posted by surrealist
Ho ho ho Merry Christmas!

After reading all that, all I have to say is...

Bah humbug!!!

this planet has issues.

posted on Nov, 17 2011 @ 10:23 PM
Burn, burn yes their gunna burn.
Burn, burn were all gunna burn.

posted on Nov, 17 2011 @ 10:47 PM
life is dandy on the bottom of the pyramid. I'm really not sure what kind of comment to post.

posted on Nov, 18 2011 @ 01:43 PM
They must all be hoping that those 'hedge' bets will be covered by another bailout from the taxpayer... because if not, how are they going to cover the bets if they all go under?

Look at what happened with AIG... The 'insurance' taken out by Goldman Sachs (on the whole sub-prime thing tumbling down) would not have been paid out by AIG when they went bankrupt. The only reason they got their money was the bailout AIG received from the taxpayer.

I suspect someone at Goldman 'convinced' those responsible for the bailouts that AIG was a truly worthy cause.

I wonder if a similar thing will happen when this whole mess goes nuclear, and everyone starts trying to collect their insurance (hedges) from everyone else.

What a mess!!

posted on Nov, 18 2011 @ 01:52 PM
They're like a bunch of gambling addicts at a casino looking to parlay their last few dollars into a gazillion bucks . . . they're lobbing up hail marys now . . . not a good sign.

posted on Nov, 18 2011 @ 02:38 PM
Good riddance I would say. The sooner the better and may EVERY depositor quickly get their funds and precious savings out from them.

The Banksters and their pliant media thinks too highly of themselves. Let them burn, fall and collapse on their own mistakes. It's only the Capitalist way. No way will such polices of 'too big to fail' or 'privitise profits but socialize costs' MUST EVER BE HEARD again in civilisation.

Let them be liquidated and every penny squeezed dry from them and their families to pay back any depositor whom had been tardy in withdrawing their funds, and then pack them into prison for their scam after a fair trial, not neccessary death as the brutal and barbaric China CCP would have done.

Only when they are gone will a new banking system be allowed to grow uninhinderd by baggages and hidden agendas of the past, hopefully more ethically this time, along with new entreprenuers to meet mankind's need for honest banking services.

May the current banksters take a photo shoot of themselves with their banks while still not in chains. The photos would be good reminders of their mistake made against humanity.

posted on Nov, 19 2011 @ 04:57 AM
Considering each of the institutions listed have exposures amounting to a mere fraction of what they aiphoned up during TARP, this article actually eased some of my fears about the pending EU implosion's impact on the US. $10 Billion? $29 Billion? Hell, that's close to Fannie Mae and Freddie Mac's losses for a GOOD quarter. I'd have expected the potential US banking losses to be in the trillions.

Either there's something I'm missing here, or thanks OP for the uplifting news.

posted on Nov, 21 2011 @ 03:21 PM
Sometimes it is not what is immediately apparent or disclosed that is the real concern:

MF Global customer cash shortfall 'doubles to $1.2bn'

The shortfall in customer cash held by collapsed brokerage firm MF Global may have doubled to $1.2bn (£760m), according to liquidators.

Original estimates of a shortfall in customer cash were around $600bn.

posted on Nov, 21 2011 @ 06:31 PM
The snap back in this bungie chord will break alot of necks.
Overnight capital liquidity will dry up so will, market and consumer
confidance. if a CDS cascaide is triggered it will but a very fast ride
to the bottom for every ecconomy on the plannet. borrowing between
nations will stop, and internation aid and food programs will stop.
I hope that there is alot of contigency planning occuring with governments
because, this is a monster wave comming towards land fast.

posted on Nov, 21 2011 @ 06:43 PM
I just don't know how much longer they can hide this gargantuant, global economic, meltdown, they are so fudging the numbers somewhere..

With this news, The retards out in DC, not figuring out how to stop borrowing every 50 cents for each dollar they spend, its just a matter of time, before this come crashing down...

Then again thou, I thought the crashing down would have happened already, so yea, their is defiantly some cheating going on out there at the top..

At least in my opinion.. Maybe another drop in our credit rating will get it thru their thick skulls...

Ya did you guys already forget about that?

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