John Ward September 22, 2011 French banks in trouble

CRASH 2: Shunned by Beijing, BNP Paribas asks Sarkozy to intervene, rushes to the Middle East

“How much?”

Slog suspicions confirmed as wobbly French bank dash to Qatar in search of funds.

South Africa delays giving BNP a license

After The Slog pointed out last Tuesday that the Chinese leadership had lost faith in leading French bank BNP Paribas, news emerged last night that its senior executives are scouring the sovereign and personal wealth of the Middle East in search of additional funding. Sources in Paris further suggested early this morning that BNP management have been pressurising the Elysees Palace for combined State action to thrust massive (but targeted) liquidity into the system. The Slog also reported last week that senior civil service advisers to President Nicolas Sarkozy had warned that such a move would be sought.

“The very fact that they ask for this at all suggests they are in trouble,” said my informant, “Bankers are, after all, not renowned for their philanthropy. When BNP says ‘targeted’ it means ‘targeted at me’.”

BNP Paribas Bank has a very high exposure to ClubMed toxicity. Its tier one capital ratio is 9.6% – down among the lower end of walls erected against bad debt by eurobanks. It recently conducted a €70bn asset sale to boost its capital and reduce funding needs.

Putting a brave face on things, the bank’s chief executive Baudouin Prot says in an Les Echos interview this morning that BNP will meet the new Basle III requirements on banking capital by Jan. 1, 2013 without a capital increase. But this is an invidious statement that would apply to any French bank: things have moved on a long way since Basle III – and a trio of ClubMed defaults would make a laughing stock of the Basle levels. (The Slog has long argued for a cap/liquidity percentage neared to 20% than 10%).

The reality is that an hour ago, news that Qatar is in talks with BNP Paribas on taking a stake in the troubled bank was confirmed – and a cash for equity swap would not be on the table if the bank’s affairs were hunky-dory. This has echoes of Barclays’ dash for capital (in order to avoid a Government bailout) in 2008.

Just 48 hours ago, Beijing cut the rope on BNP. Now it’s in Qatar with equity on the table. It’s asking for the State to pile in with liquidity injections. And now it transpires that South African regulators have delayed its licence to provide banking services there because of doubts about its financial stability.

Never listen to what people in a corner say: always watch the moves they make. That’ll be a much clear guide to what’s really going on.

Stay tuned.

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1

Good luck to all you strikers today... on December 2, 2011 at 2:03 pm

[…] I new about this as it happened, technology is such a wonderful thing……………. CRASH 2: Shunned by Beijing, BNP Paribas asks Sarkozy to intervene, rushes to the Middle East | The … They did'nt get enough funding in place from that. and it went Tit's up last week. They are […]

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nerdman on September 22, 2011 at 6:40 pm

Amanda. Having lived through the remnants of the 1930s depression,the second World War,and numerous depressions since,although I think they are one and the same. Two things stand out. Prices of commodities,go through the roof,if you can get them. People have not made provision,even if they are aware,for the worst scenario, For example old age pensioners,may not get paid on time,or at all. Your bank may shut. Your postal service may stop.Your energy company,may not provide any energy,and so on.Insulate to the nth degree. Have a small room,for living in,if power is shut off.get a campus stove to cook on,and heat hot water. Buy in lots of tinned food,packet foods,rice,porridge,potatoes etctea coffee long life milk.Matches and candles.a good torch with plenty of batteries. Keep your mouth shut tight. People without ,will hit people with. Thats a promise. I could write a lot more but this Johns site,and I would be so disrespectful. Be aware!!!

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MickC on September 22, 2011 at 5:39 pm

RT-yes the point I was trying to make was Cameron decrying the people we are probably going to have to borrow money from. When I want to borrow money I always tell the lender what a shower they are-not!
The Russians send their kids to school here as well-they always paid their fees yearly in advance in cash; I’m sure that nice Mr. Putin would help us (and Europe) -on terms of course!

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sandysview on September 22, 2011 at 5:22 pm

Amanda, keep reading the slog. He’ll tell you what to look for next, Just make sure the drinks cabinet is stocked and get some chickens.

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leila young on September 22, 2011 at 4:33 pm

As an agonised voter in the US said ‘we vote Democrats and get Mexicans, we vote republican and get Mexicans’

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amanda burger on September 22, 2011 at 4:11 pm

@NERDMAN ~ any advice for the inexperienced?

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Kit Green on September 22, 2011 at 3:45 pm

If you are looking for a French bank implosion derivative play, look no more.
http://www.zerohedge.com/news/morgan-stanleys-exposure-french-banks-60-greater-its-market-cap-and-more-half-its-book-value

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Bankrupt Taxpayer on September 22, 2011 at 3:17 pm

@Nus: Thanks for those kind words. I agree very much with the gist of your comments.
In Britain, we have never really understood the difference between two very important groups in society: “The Producers of Wealth” -vs- “The Consumers of Wealth”.

This has led to a bizarre situation where apparatchiks of The State (consumers of wealth) are generally seen as more important than the people they are employed to oversee. The best example of this is the Civil Service which is seriously bloated, incompetent and hugely expensive.
New/Old Labour governments have been in the forefront of promoting the idea that more State employees is ‘good’, whereas it is actually ‘bad’, but that’s why they always increase the State headcount when in office.

In the huge global corporaton I worked for 25 years that difference was never ever confused: salesmen/systems engineers and front line people were producers of wealth whereas administrators were consumers of wealth. Headcount of the latter were always tightly controlled.

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Bankrupt Taxpayer on September 22, 2011 at 3:04 pm

@Sinking Euro: I agree with you but please understand that I am no supporter of anything that remotely resembles socialism which I have previously said (IMO) is a mental disease, not an alternative system of government.

That said, my previous comments are pretty much true.
We now have a coalition govt in office and they’ve left IRs at 0.5% which I believe is wrong and seemingly are about to authorise the BoE buffoons to print another ton of money (QE). I believe that is wrong, too.
Those are the same policies of the previous Labour government, IOW vote for who you like but you get the same policies.

Nick Parsons has just said on Sky (paraphrased): “the problem is not with high interest rates, it’s a problem of consumer confidence. That’s why consumers won’t go out and spend.” IMHO, he’s right.

I have also said here previously that Cameron is squandering a lifetime opportunity of reforming our hugely expensive and wasteful system of government, where far too many people with power are totally unelected and unaccountable. Within a few months of taking office, he should have announced the closure of at least two Ministries, slashing Civil Service headcount and taking a chainsaw to the bloated but ineffective UKBA etc. These things – and others – would have reduced Big State spending w/o affecting public services. Britain needs to come out of this economic crises as a much leaner and more efficient country.

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Bankrupt Taxpayer on September 22, 2011 at 2:44 pm

@Robert: things may not be changing in France as much as you think given that the National Front are socialists wearing jackboots to enforce their socialist policies more effectively. Of course socialists always deny their underlying roots and publicly claim to hate each other but that’s just a façade.
Likewise in Britain, the BNP is overwhelmingly made up of ex-Labour people who are frustrated with Labour’s “moderate” ineffective policies; they want more socialism, not less.

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Nus on September 22, 2011 at 2:24 pm

BT
You are on the pulse as always
However the problem we are witnessing before our very eyes is multidimensional ;
1st the elitists have no desire to change – nor comprehension of what is really going on
2nd the governments are nothing but puppets which sole purpose is to provide huge advantages for the few & demoralise the many. Ultimately forcing the many into submission to the few
3rd the banisters who haven’t done a single day of honest leaving in their lives
4th the cheerleaders who support the above layers (managers, media, pr, marketing etc)
5th the lawers that ringfence and place boundaries to protect all of them.
6th the rotten receptors, nerves of the society (police, unions, quangos etc)
7th the lithargic mass on benefits – comanding attention and rights BUT no commitment to refrain and discipline
8th the primitive but stubborn and arrogant wannabes WILL sacrifice everything and anything to get there despite clear lack of skills, dedication and effort
9th the hard working honest people who have to support all the above. They have to discipline, refrain, stress, dig deep for what? I cant even get a flipping cup of coffee to relax without agro.

Get the picture?
People at the last and Only Added value layer had enough

The only way to fix this is by honest and free education. Fat chance ; militaristic structures in our communities will prevent that. When was the last time that army created anything?

To create you have to break out and from all this!!! Too much energy at the moment is spent containing what?

Control an illusion
Creation only by education, dedication and pain

Expect fireworks and loud noises ;-)

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Harold Rosario on September 22, 2011 at 2:23 pm

I am absolutely gobsmacked by this news. Madame Lagarde assured us only a few months ago that the French Banks were absolutely okay!

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TheRagingTory on September 22, 2011 at 1:49 pm

The dictators with cash to spare send their kids to our schools and buy Eurofighters from us…..

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Sinking Euro on September 22, 2011 at 12:56 pm

‘is that it rarely achieves anything.’

Interesting. Britain still retains its AAA rating in fact paying just over 2% for government gilts. Contrast that with the probable downgrade, quantative easing possibly £50 billion more already to pay for a government unable to say no to its union paymasters. Its not beyond the realms of possibility Gilts would be in the 4.5% to 5% range now. Or more.

For a country that has over 8 million economically inactive, £ 1 trillion official debt, plus the ‘off balance sheet’ liabilities that have to be funded by taxpayers or borrowings. Massive PFI ,unfunded pension liabilities and a bank recapitalisation programme of RBS and Lloyds together with Northern Rock this is hardly nothing. Britain does not have the luxury of reserve currency status like the US to encourage a flight to safety. Brown’s Britain is not a pleasant thought.

The mess is so large its going to take longer than five years to clean up the unholy alliance of labour’s light touch regulation and an incompetent financial sector selling illusions of wealth to feather its own nest.

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MickC on September 22, 2011 at 12:43 pm

Haha! The West needs the help of the Middle Eastern oligarchs just when our beloved leader is wittering on about pulling down the dictators -you really couldn’t make it up its so bloody incompetent.

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nerdman on September 22, 2011 at 12:14 pm

Now I am frightened. From Japan,to Europe,to America,and China,the bubble is bursting,unable to stand the pressure,any more. Now you need to make your moves,to keep your families safe. The Markets are unravelling,at ever increasing speeds,as the bad news gets worse. Good luck to all of you,including John.

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Robert on September 22, 2011 at 11:59 am

Things are changing in France. If the run off for the election is between the socialist candidate and the National Front there is good chance that the National Front will win. The socialists wouldn’t vote for Le Pen so they opted for Chirac last time. Don’t count on the French right voting socialist if Sarkozy has been eliminated by Le Pen’s daughter.

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william, on September 22, 2011 at 11:53 am

You can smell the fear in the markets,65 miles from London,on top of the South Downs.Single currency,eh,but it’s each for his own,as the ship goes down,and Sarko desparately needs to talk to Amanda Staveley about her Arab connections.Is Merkel going to ride to the rescue of the Clubmed banks,casas and governments? Of course not.Like 1974 Britain, the politicos all over Europe have lost any vestige of control,and are about to discover the virulence of the market adjustment mechanism of 1987.

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Simon on September 22, 2011 at 11:49 am

You’re not wrong BT.
Those in power are just doing what they can to stay there and enjoy the ride. Whoever is voted in is only allowed to tinker at the edges. The big decisions are taken by those in Whitehall who are always in the shadows pulling the strings for their vested interests. Unless we do away with theis back office and start again there will never be any real change.

An election every five years or so is just to give the little people the illusion of democracy and being able to make some worthwhile change.

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dermot o'malley on September 22, 2011 at 11:49 am

Couldn’t agree more Bankrupt Taxpayer. Here in Ireland we booted out the last government, a monumentally unpopular coalition of Greens and Fianna Fail and voted in a coalition of Fine Gael and Labour and guess what……….?? Nothing has changed. All promises made in the election campaign were instantly ditched, usually explained with the following reasoning: “We had intended to do x, y and z but on seeing the books for the first time and realising just how bad things are we now cannot make good on commitment x,y and z”. Nothing has changed here and nothing will.

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Bankrupt Taxpayer on September 22, 2011 at 11:03 am

A problem with changing the government in France – plus other EU countries and the US – is that it rarely achieves anything except to give voters a warm feeling of being in control and kicking out of office the incumbent political elites.
We can see this in Britain where kicking Labour out of office (only just), the morning after we are still faced with critical economic conditions that nobody knows how to fix and the problems simply get kicked down the road.

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Sinking Euro on September 22, 2011 at 10:52 am

Lets be clear, French Banks because of their close working relationship are a reflection of the French Republic.

So how much room for manoeuvre has France before any bank re-capitalisations ?
Unemployment close to 10%, National Debt at close to 80% of GDP
Foreign trade deficit of €56.3 billion, Budget deficit of 5.8 percent that is nowhere near being brought under control.
“I’m not sure if the French people really understand what’s going on,” Sarkozy has complained.
His prime minister, François Fillon, is a little more forthright. “I’ve been trying for two years to shake some sense into the political classes that don’t want to believe we’re staring into the abyss,” he says. “We’re on our last legs here.”

More and more people are sounding the alarm, everyone from financial experts to politicians. Jean Peyrelevade, former head of Crédit Lyonnais, a French bank which has since been bought up and renamed, has diagnosed France as being in “critical condition” and says the country has been in a continuous economic decline for the last 10 years. “With recklessness and arrogance, France continues to live in its economic bubble, convinced it will never burst. The hard truth of statistics is unrelenting in its proof that the opposite is true,” Peyrelevade says.

Centrist politician François Bayrou, who obtained nearly 20 percent of the vote in France’s 2007 presidential election, has even declared a “state of emergency” for 2012. France is bleeding to death, he says,

All in an election year which will result in French political inertia.France richly deserves and is long overdue its AAA downgrade. Sarkozy is toast in 2012.

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Kit Green on September 22, 2011 at 10:45 am

BNP Paribas discussed in part two, from about 14 mins in:
http://rt.com/programs/keiser-report/episode-187-max-keiser/

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John Ward on September 22, 2011 at 9:14 am

How kind, Liz. Thank you so much.

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Liz O'Donnell on September 22, 2011 at 8:53 am

JW, as I don’t have enough knowledge on the situation (although your blogs are an education) to pass any comment, I read your essays every day and I’m astounded by the volume of your work and the sheer dedication you have applied to the task. Thank you, I take my hat off to you.

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AJC on September 22, 2011 at 8:43 am

You don’t think that Sarkozy could have had his bank(s) in mind when he said “US leadership on the [Israel/Palestine] issue had failed and called for a new initiative involving Europe and Arab states to create a Palestinian state within a year”.

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