European banks sitting on £16.3 trillion of toxic assets may suffer massive losses

[GoldGoldGold]

European banks may need massive bail-out
European banks sitting on £16.3 trillion of toxic assets may suffer massive losses, according to a confidential Brussels document.


By Bruno Waterfield in Brussels
Last Updated: 1:51PM GMT 11 Feb 2009

http://www.telegraph.co.uk/finance/f...ent-warns.html

A secret 17-page paper discussed by finance ministers, including the Chancellor Alistair Darling on Tuesday, also warned that government attempts to buy up or underwrite such assets could plunge the European Union into a deeper crisis.

National leaders and EU officials share fears that a second bank bail-out in Europe will raise government borrowing at a time when investors - particularly those who lend money to European governments - have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain to pay it back.

“Estimates of total expected asset write-downs suggest that the budgetary costs – actual and contingent - of asset relief could be very large both in absolute terms and relative to GDP in member states,” the EC document, seen by The Daily Telegraph, cautioned. “

"It is essential that government support through asset relief should not be on a scale that raises concern about over-indebtedness or financing problems.”

European Commission officials have estimated that “impaired assets” may amount to 44pc of EU bank balance sheets. The Commission estimates that so-called financial instruments in the ‘trading book’ total £12.3 trillion (13.7 trillion euros), equivalent to about 33pc of EU bank balance sheets.

In addition, so-called 'available for sale instruments' worth £4trillion (4.5 trillion euros), or 11pc of balance sheets, are also added by the Commission to arrive at the headline figure of £16.3 trillion.

Banks account for their assets in different ways. Assets put into the “trading book” have to be marked to current market values, while those in the “banking book” are loans and other assets which the institution believes it can hold to maturity. Other assets are classified as “available for sale”, which are also marked to market values.

The Commission figure is significant because of the role EU officials will play in devising rules to evaluate “toxic” bank assets later this month. New moves to bail out banks will be discussed at an emergency EU summit at the end of February. The EU is deeply worried at widening spreads on bonds sold by different European countries.

In line with the risk, and the weak performance of some EU economies compared to others, investors are demanding increasingly higher interest to lend to countries such as Italy instead of Germany. Ministers and officials fear that the process could lead to vicious spiral that threatens to tear both the euro and the EU apart.

“Such considerations are particularly important in the current context of widening budget deficits, rising public debt levels and challenges in sovereign bond issuance,” the EC paper warned.

[pssst]

Thats a LOT of Money

[Robert Hawkins]

Hmmm... the Telegraph has deleted the $ amounts mentioned in the story and they have removed the blog post associated with it as well.

The revised article:
http://www.telegraph.co.uk/finance/f...ent-warns.html

The blog story(vanished)
http://blogs.telegraph.co.uk/bruno_w...l_163_trillion

I guess someone didn't like this info getting out?

[pssst]

Originally Posted by Robert Hawkins

Hmmm... the Telegraph has deleted the $ amounts mentioned in the story and they have removed the blog post associated with it as well.

The revised article:
http://www.telegraph.co.uk/finance/f...ent-warns.html

The blog story(vanished)
http://blogs.telegraph.co.uk/bruno_w...l_163_trillion

I guess someone didn't like this info getting out?

Looks that way....wow

[TXBSAFH]

This could cause a bank stampede (not run, but stampede).

[LONEWOLF]

Clever little devils, aren't they? Slow perhaps....

So lending Institutions in the EU and elsewhere might have followed the advice of those hot-shot US Investment Houses that bundled risky assets as a "security", then had a fakey-rating of "AAA" stamped on them, run a few $billion's worth of CDO's on the associated risk Companies for good measure, and slap "It's" ass on the way out the door to the open arms of another due-diligence sucker?? The Investment House likely was selling expensive investment advice to the Buyer AND the Seller here. Nice plan. Worked for a few years. What senseless SOBs. World-wide greed, the common denominator in Mankind is corruption and "mammon".....

[pssst]

I just noticed this was up on DRUDGE....so no wonder the numbers got "edited"....

[GoldGoldGold]

Originally Posted by Robert Hawkins

Hmmm... the Telegraph has deleted the $ amounts mentioned in the story and they have removed the blog post associated with it as well.

The revised article:
http://www.telegraph.co.uk/finance/f...ent-warns.html

The blog story(vanished)
http://blogs.telegraph.co.uk/bruno_w...l_163_trillion

I guess someone didn't like this info getting out?

Good catch robert. . .

Here's the new version. . .

European bank bail-out could push EU into crisis
A bail-out of the toxic assets held by European banks' could plunge the European Union into crisis, according to a confidential Brussels document.


By Bruno Waterfield in Brussels
Last Updated: 3:50PM GMT 11 Feb 2009

http://www.telegraph.co.uk/finance/f...ent-warns.html

“Estimates of total expected asset write-downs suggest that the budgetary costs – actual and contingent - of asset relief could be very large both in absolute terms and relative to GDP in member states,” the EC document, seen by The Daily Telegraph, cautioned.

"It is essential that government support through asset relief should not be on a scale that raises concern about over-indebtedness or financing problems.”

The secret 17-page paper was discussed by finance ministers, including the Chancellor Alistair Darling on Tuesday.

National leaders and EU officials share fears that a second bank bail-out in Europe will raise government borrowing at a time when investors - particularly those who lend money to European governments - have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain to pay it back.

The Commission figure is significant because of the role EU officials will play in devising rules to evaluate “toxic” bank assets later this month. New moves to bail out banks will be discussed at an emergency EU summit at the end of February. The EU is deeply worried at widening spreads on bonds sold by different European countries.

In line with the risk, and the weak performance of some EU economies compared to others, investors are demanding increasingly higher interest to lend to countries such as Italy instead of Germany. Ministers and officials fear that the process could lead to vicious spiral that threatens to tear both the euro and the EU apart.

“Such considerations are particularly important in the current context of widening budget deficits, rising public debt levels and challenges in sovereign bond issuance,” the EC paper warned.

[Spoze]

If the 16.3 trillion number is correct, then they're toast. There's no way that amount can be covered, and I can't see how the US or Asia are any worse off. Numbers-wise maybe, but not relatively speaking. Asia is just beginning its long, slow ride into oblivion. So, what do we have...Europe is toast, the US is toast, Japan and Korea and China are toast, Russia is toast, Mexico is toast. The whole system is toast. We'll need lots of jam and butter.

[Sleeping Cobra1]

And the tax payers will pay for this.