ECB Acknowledges European Banks Are Not Doing Well

Do not believe anyone telling you the European banking sector is healthy. None other than the European central bank, the ECB, is aware of the problem, having just confessed to it. The news was only mentioned in passing in some specialized magazines, but it deserves to be put under the light. One of the ECB’s directors, the Frenchman Benoît Coeuré, has said that “there may be room for another TLTRO (L’Agefi).

TLTRO’s (Targeted Long-Term Refinancing Operation) consist of really low rates offered by the ECB to commercial Euro zone banks in dire need of cash. The previous one had been launched in June 2016, for a four-year period; reimbursement is due to begin starting in June 2020. But the problem is that several banks do not have that cash, due to their degraded financial situation – hence the willingness of the ECB to propose another round of TLTRO. This is one of the means to keep the debt rolling, to be irresponsible with the economy... 

The amounts involving banks of several countries in 2016 have been estimated by Reuters. We’re aware of the degraded situation of Italian and Spanish banks, like that of Deutsche Bank, Commerzbank, and several other regional German banks. But what constitutes a surprise is that France is taking the third position, ahead of Germany, even though the difficulties facing Germany’s largest bank are worrying a lot of people in Europe and elsewhere in the world. Are some French banks hiding something?

Since January 1st, the ECB has stopped its QE or ended its bond buy-back programme. All of 2.6 Trillion euro wasted on them served no purpose, as we have mentioned. They’ve had no effect whatsoever on economic growth. Their true usefulness will only have been to keep interest rates low so that States could continue to go into more debt, and to provide liquidity to banks in need of cash. So for ailing banks, there’s nothing that will fix it but another round of TLTRO. 

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Gary Anderson 1 month ago Contributor's comment

Wow, the ECB will treat the banks like Greece. It is a tragedy but there is a certain humor in it. Only difference between Greece and the banks is that the bank leaders will fare better than the little nation that was tortured by the ECB.