“A horse! a horse! my kingdom for a horse!”. After the results of the European banks’ stress test I want to cry: “A Brexit passport! a Brexit passport! My house for a Brexit passport!”
And I’m not joking.
The much expected results of the 2016 EBA’s stress test of the main EU lenders is a farce, and it’s not funny, because the lives of millions could be jeopardised by it.
The desperate EU regulators rigged the test to the point of ridicule: first it did not examine lenders from Greece or Portugal, where banks’ balance sheets are akin to a warzone.
Second, the test lacked a pass/fail mark.
Then EU regulators pretended that the catastrophic NIRP factor (negative interest rates set mainly by the ECB) didn’t exist.
Well, if they had, Deutsche Bank would have exploded the test, as NIRP is the reason why Deutsche is falling to bits recently (not to mention that the German juggernaut harbours explosive derivatives to the tune of twenty times the German GDP).
But the rigging yesterday went on.
EU lenders have amassed some 1.7 trillion euros in Non Performing Loans (NPLs), with Italian banks accounted for 360billion euros of that nightmare. How did Unicredit and Intesa come clean yesterday with 84 and 63 billion euros in rotten loans respectively?
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The hard truth is that most EU banks emerged alright from this stress tests because they were allowed to.
Here are the tricks: set up bad banks, submit “risk adjusted” figures (not the much more reliable “Leverage Ratio” proposed by Britain), establish Special Purpose Vehicles, frantically offload Asset Backed (rotten) Securities to Vulture Funds, and more.
Draghi always turned a blind eye on these tricks, exploiting loopholes in the EU regulations, as it happened in the previous banks’ stress test of October 2014.
So yesterday’s stress test was shamefully rigged. It had to be, Mr Draghi had no choice. Could he tell the truth and trigger the implosion of the global financial world? No.
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Now to the main point. Britain has some shaky banks too, notably Barclays Plc, but nothing like the rest of the EU nightmare.
In fact it ranks fourth best in the EU NPLs Financial Times charts - 24 other EU nations are in much worse shape.
However ‘contagion’ from an EU massive banking crisis would make the UK suffer.
So here is more bad news from Eurohell, I’m afraid. As the world’s leading financial analysts have been saying for years now, the reason why EU, and above all Italian banks, went down the drain is the so called ‘Optimal Currency Area’, the Eurozone that is.
As this absurdly constructed Monetary Union progressed from the year 2000, EU banks’ balance sheets started crumbling under the weight of millions of firms and families who were unable to repay their loans.
Why couldn’t they? Because the Troika’s (IMF, EU Commission and ECB) now fully shamed austerity policies devastated our previously good economies.
As a matter of logic what follows is that since the Troika has no intention whatsoever to mend its destructive economic ways. EU banks will continue to suffer over and over and over, with no end in sight.
There is no point in recapitalising them, or injecting liquidity, or reassuring investors with fabricated stress tests as long as Mrs Merkel’s self defeating economic Bible keeps hitting EU banks and borrowers at the same time.
Billions of Europeans’ taxpayers money will be thrown down the drain in this crazy ballet called EU bail-outs/bail-ins, and eventually the implosion will come, dragging with it British banks and others in many more countries.
Brexit Britain must, Mrs May, rush to protect the UK banking system as best as it can, now!
Mark Carney and UK regulators free of Brussels interference can act from today. Just tell them to do it Brexiters.
Eurohell could still hit your lenders and your economy even if you voted out of it. Beware of Draghi’s rigged school reports.
Paolo Barnard is an Italian journalist and economist
http://www.express.co.uk/comment/expresscomment/695002/EU-stress-test-farce-Eurozone-european-union-finance-Paolo-Barnard
