In a little under two minutes, Nigel Farage sums up the utter farce that “the religion” that Europe has become. He explains, his fear is that what will break up the Euro, “is not the economics of it, but wholesale, violent revolution,” in the Mediterranean, and that is “all so unnecessary!” Speaking at Simon Black’s Offshore Tactics workshop, the so-called modern day Cicero goes on to point out that France’s Hollande is “the number 1 among idiots running countries around the world,” and worries that Merkel’s pending election means there will be more and more ‘tough talk and action’ as she shows the people she is in charge. Simply put he warns, alongside Ron Paul, that if you have money in European banks, “Get your money out,” because, “when the next phase of the disaster comes, they will come for you.”

Europe’s €490bn fixed value money market fund industry will be “killed off” by tough reform proposals drafted by the European Commission, industry figures have said.

The clampdown could also undermine the larger variable net asset value money fund sector, potentially increasing risks for investors.

The leaked draft forms part of a global regulatory backlash against constant NAV money funds, which invest in high-quality, short-term money market instruments and trade at a fixed €1 or $1 a share except in extreme circumstances.

Brussels argues constant NAV funds are susceptible to “massive and sudden redemption requests”, which can create systemic risks given that money market funds hold 38 per cent of short-term debt issued by European banks. >> Read More

US plans to force foreign banks to hold more capital are a threat to harmonious global regulation and risk “a protectionist reaction”, the EU commissioner in charge of financial services has warned.

Michel Barnier told Ben Bernanke, Federal Reserve chairman, that plans to force higher capital requirements on the US subsidiaries of European banks could lead to retaliation against US banks.

In a pointed letter seen by the Financial Times, Mr Barnier argued that the Fed plans are a “radical departure” from past US policy and could hamper the international economic recovery.

He warned that retaliation could “end up with a fragmentation of global banking markets”. >> Read More

The main source of short-term funding for European banks could more than halve if a new financial transaction levy goes ahead, according to the International Capital Markets Association.

The EU’s proposed levy on financial transactions in and around the region is expected to raise €30bn-€35bn a year.

But the tax will have “serious” consequences for the repo market, the European Repo Council of ICMA warned on Monday, and would cause the short-term funding market to contract by 66 per cent, according to a study it commissioned.

The proposed levy, which will take effect next January, will include transactions in the repo market, where banks pledge securities as collateral in exchange for funding from other financial institutions. >> Read More

European banks will need to shed as much as another €3.4tn from their balance sheets over the coming years by reducing lending and selling assets according to new data, adding to fears about a funding gap opening for European corporates.

Europe was already bracing itself for about €2.4bn of “non-core” asset disposals – more than 7 per cent of total banking assets – over the next seven years as banks are mandated to reduce the risk on their balance sheets.

But new figures from PwC, the consultancy, to be released on Tuesday, suggest the problem of banks retreating from their traditional lending activities could be far worse than expected.

While in 2012 banks shed €600bn-worth of assets to help comply with upcoming regulation, at the same time they admitted an extra €500bn of “non-core” assets on their books that was previously unaccounted for and would need to go as well.

Following this data, PwC is now predicting up to another €1tn of fresh admissions in the coming years as banks look to meet with Basel III regulatory requirement. Nearly 90 per cent of deleveraging last year was focused on reducing lending. >> Read More

Golden Jackass Jim Willie sat down with The Doc this weekend for an extraordinary interview regarding gold, silver, and what Willie believes will soon be a massive European banking collapse.

Willie states that a Big European Bust is Coming- evidenced by the fact that European banks received $1.2 trillion from the NY Fed in January alone!
Willie states that the coming European bust will ignite a global Gold rush, a massive short covering rally, and will result in a powerful 30% to 50% rise in the gold price!

Willie also discusses gold and silver backwardation, the recent paper raids, andwhether or not the metals face the risk of a 2008 type collapse as the Western financial markets go down in flames!

Click here for the explosive interview with the Golden Jackass!

Europe has now officially become the Schrodinger continent, demanding both sides of the economic coin so to speak, and is stuck between the proverbial rock and hard place (or “a cake and eating it”). On one hand it wants to telegraph its financial system is getting stronger, and doesn’t need trillions in implicit and explicit ECB backstops, on the other it needs a liquidity buffer against an economy that, especially in the periphary, is rapidly deteriorating (Spanish bad debt just hit a new all time high while Italian bad loans rose by 16.7% in one year as more and more assets become impaired). On one hand it wants a strong currency to avoid any doubt that there is redenomination risk, on the other it desperately needs a weak currency to spur exports out of the Eurozone (as Spain showed when the EUR plunged in 2012, however that weak currency is now a distant memory and it is now seriously weighing on exports). On the one hand Europe wants to show its banks have solidarity with one another and will support each other, on the other those banks that are in a stronger position can’t wait to shed the stigma of being associated with the weak banks (in this case by accepting LTRO bailouts).

It is the latest that is the most glaring dichotomy because as reported earlier, while some 278 banks, or about half of the original LTRO participants, voluntarily paid back some €137 billion to the ECB, it is none other than Moody’s warning that European banks, especially those in the periphery, will need much more cash.

From Reuters:

 

Banks in Spain, Italy, Ireland and Britain need to set aside much more money to cover potentially bad loans, credit ratings agency Moody’s said on Thursday, meaning European taxpayers may again be tapped for cash. >> Read More

European banks can begin repaying LTRO funds on January 30.

It’s not clear how much of the low-cost borrowing will be unwound and what it will mean.

ICAP explains that many banks used a carry trade to profit from the cheap funding scheme. As the trades unwind, there are risks to the credit, repo and Euribor markets.

I expect the risks are low because most loans are for three years so repayments now would be voluntary so they will/should be timed to limit distortions … but you never know.

European lawmakers are set to approve new rules on credit-rating firms Wednesday that will restrict the firms’ freedom to change sovereign-debt ratings and make them more vulnerable to lawsuits.

The European Parliament is expected to pass a compromise draft law that was finalized in November after long negotiations between member states and lawmakers, European officials said. European Union finance ministers are scheduled to sign off on the legislation in coming weeks.

This will be the third set of European regulations for rating firms since the financial crisis erupted. Rating firms came under criticism after credit markets seized up in 2007, as complex credit products that were given top-notch triple-A ratings later caused large losses for many U.S. and European banks.

The three main ratings firms–Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings–also angered politicians with the timing of decisions to downgrade the credit ratings of many European sovereigns during the region’s economic and debt crisis.

At the heart of the new legislation are five changes: a push to discourage the automatic use of ratings by financial firms and EU institutions, efforts to relax the grip of the dominant ratings firms on the industry, restrictions on when ratings firms can change sovereign-bond ratings, a move to make it easier to bring lawsuits against firms for negligence, and an effort to prevent firms from rating bonds issued by companies that are significant shareholders. >> Read More