Bank Apoptosis Due to Sudden Liquidity Death

Georgi Stankov, March 24, 2016

A few days ago I introduced a new technical term “Financial Apoptosis which means “Sudden Death” in the banking system. With it I described the incoming destiny of all “too-big-to-fail” banks and also many big corporations when they will enter the liquidity death spiral. I use also the term “sudden illiquidity” as “lack of liquidity”, although this word cannot be found in the Webster dictionary. The logic behind this concept is that the economy has entered the final phase of rapid unwinding of the gargantuan debt which state governments, banks, including all central banks, corporations, and private persons have amassed during the debt orgy which exploded with the 2008 crisis. One has so much credit line, until it is closed all of a sudden and he is broke. What happens then is illustrated ingeniously in the hilarious comedy “Trading Places” which is a precursor to the cabal plan how to enslave the masses financially into the NWO.

For instance, I am writing for almost two years that Canada is bankrupt and that the bill will be presented to the people by the new rogue liberal government that will break all its pre-election promises. I have tried to discuss this issue with some slumbering Canadians here but the typical feature of this North-American type of character is not to have any propensity to listen and only to talk incessantly trash like a juke-box, especially the women. Sorry, but this is the bitter truth about this northern nation and it is the finest way to express it. I leave the adequate harshness of expression to fortuna (or instant karma) when it will hit the Canadians very hard in the coming days.

Yesterday, Canada’s new liberal government unveiled a stimulus budget meant to revive slumping growth with a surge in infrastructure spending and said it would run a deficit nearly three times larger than promised during last year’s election. The government projected a C$29.4 billion ($22.5 billion) deficit for fiscal 2016-17 and gave no target date for returning to a balanced budget. This budget broke virtually all pledges the liberals made before the election, including running just three years of deficits of up to C$10 billion before balancing the books by fiscal 2019-20.

We are seizing the opportunity to invest in people and the economy, and to prepare Canada for a brighter future,” lied blatantly finance minister Bill Morneau yesterday. What he is really seizing is the Bank of Canada money printer, because in order to monetize this surging deficit, the BOC will soon have to unleash its own QE in the coming months. As Reuters adds, because the liberals command a majority in the Canadian parliament’s House of Commons, the budget is guaranteed to pass.

This is bad news not only for the Canadian Dollar, which will certainly devalue even more in the coming months as the market prices in this kind of massive surge in deficit spending, but first and foremost for all bank depositors, because deep inside the budget announcement, in the section discussing “tax fairness and a strong financial sector” (what an euphemism!), we read the official confirmation that Canada has just become the latest country (after EU and USA) to treat depositors as the bank creditors they are, and as such, they too will be impaired, or “bailed-in” the next time a Canadian bank needs to be rescued.

Here is the specific text:

” Introducing a Bank Recapitalization “Bail-in” Regime

To protect Canadian taxpayers in the unlikely event of a large bank failure, the Government is proposing to implement a bail-in regime that would reinforce that bank shareholders and creditors are responsible for the bank’s risks—not taxpayers (What is the difference between a creditor and a taxpayer, or put otherwise – is there a taxpayer that is not a creditor and depositor at the same time? What a bullshit and a direct mockery of the gullible Canadian citizens. Note, George). This would allow authorities to convert eligible long-term debt of a failing systemically important bank into common shares to recapitalize the bank and allow it to remain open and operating (understand to rob the people’s saving accounts as was executed overnight in Cyprus in March 2013), Note, George). Such a measure is in line with international efforts to address the potential risks to the financial system and broader economy of institutions perceived as “too-big-to-fail”.

The Government is proposing to introduce framework legislation for the regime along with accompanying enhancements to Canada’s bank resolution toolkit. Regulations and guidelines setting out further features of the regime will follow. This will provide stakeholders with an additional opportunity to comment on elements of the proposed regime.

Bail-in Regime for Banks

Canada’s financial system performed well during the 2008 global financial crisis (What a joke! Note, George). Since that time, Canada has been an active participant in the G20’s financial sector reform agenda aimed at addressing the factors that contributed to the crisis. This includes international efforts to address the potential risks to the financial system and broader economy of institutions perceived as “too-big-to-fail”. Implementation of a bail-in regime for Canada’s domestic systemically important banks would strengthen our bank resolution toolkit so that it remains consistent with best practices of peer jurisdictions and international standards endorsed by the G20.” (This is the closest a national government can come to admit that it is part of the global dark, criminal cabal’s conspiracy. Note, George)

Voila, my Canadian Zombies! You may close ostensibly your eyes to the inconvenient truth but you cannot avoid its ramifications. Or as I tell you: “Those who slumber in democracy wake up in a nightmare of dictatorship and experience the collapse of society.

What is the background of this radical decision? Recently I discussed that all big European banks are exposed to massive bad loans and are underfunded. This is particularly true for Deutsche bank. Moody’s Investors Service has just placed on review for possible downgrade the ratings of Deutsche Bank AG, which indicates how precarious the financial situation of this biggest derivative bank is with a total volume of derivatives’ exposure equal to 20 times the GDP of Germany, the fourth biggest economy in the world. What is true for all European banks is even more true for all Canadian banks, especially after the slump in commodities prices hit this commodity-based economy and currency hardest last year. This is what ZeroHedge wrote about the underfunded Canadian banks in February 22nd:

“While US banks had already taken significant reserves against future oil and gas loans, roughly amounting to 7% of their exposure, Canadian banks were stuck in denial.

As RBC grudgingly noted, “The small negative moves in credit would normally not even “register” were it not for plenty of evidence of issues surround the oil and gas sector and the impact it could have on the oil-producing provinces in Canada.” Yes, well, China already advised its media to stick to “positive reporting” – sadly for the energy-rich or rather energy-poor province of Alberta it is now too late.

As for this reason for this surprising reserve complacency, RBC said the following: 

Canadian banks like to wait for impairment events to book PCLs (provision for credit losses) rather than build reserves (called sectoral reserves in the past) for problematic industries.

In other words, let’s just wait with the reserves until the losses are already on the book: hardly the most prudent approach which may be why today, with its usual several week delay, Moodys opined on which Canadian banks it views as most susceptible to a “severe oil slump.”

As quoted by Bloomberg, Moody’s said that “Canadian Imperial Bank of Commerce and Bank of Nova Scotia would be nation’s hardest hit lenders if the oil slump became sharply worse, while Toronto-Dominion Bank would best be able weather a worsening rout.”

“The prolonged slump in oil prices will increase the financial stress on oil producers and the drillers and service companies that support them, as well as on consumers in oil-producing provinces,” Moody’s said. “Correspondingly, the Canadian banks’ losses in related corporate and consumer portfolios will increase, and their capital markets income is likely to decline.”….

However it was the “severe stress” scenario that was more notable not only because when it comes to worst case scenarios they tend to materialize more frequently than the “best case” but because this is the one where Moody’s actually saw significant changes to Canadian bank cash management. According to Moody’s the severe stress case “could force lenders to cut dividends, sell shares or take measures to preserve capital. The six biggest banks would see losses of C$5.56 billion ($4 billion) in a moderate scenario, while losses in a severe scenario would reach C$12.9 billion, or about 1.5 times the lenders’ combined quarterly profits.

This is the same Canadian attitude of “eyes wide shut” which created the insane real estate bubble in Canada, and in particular in Vancouver, where shacks are sold for 2.5 million CAD:

The Famous Vancouver Teardown Shack Just Sold For $2.5 Million, $80,000 Over Asking

The leitmotif of our latest discussion has been the exacerbation of human insanity in the End Time as the driving psychological force of all revelations and these stories from the insane Canadian real estate market are the best and most convincing proof. When so much insanity is in play, it is only a matter of days when it will materialise in sudden liquidity death of the banks – in Bank Apoptosis – and a shutdown of all banks in the west.

As I repeat like a parrot these days: “the writing is on the wall and you can blame only yourselves for closing your eyes.” I saw personally how many banks collapsed in the 90s in Eastern Europe and the people lost all their savings during the Greatest Easteuropean Depression of all time, bigger and longer than the Great Depression in the 30s in the West. This is not new to me, but the people in North America, and also in Western Europe except for Germany, have no experience with such big financial crashes and total losses of all their savings. This is a huge karmic deficiency of this soul population that prevents them from reading the writing on the wall and from understanding how and why the Orion matrix will collapse first in the financial sector and will turn the masses into paupers before they will be ready to embrace our transcendental teachings and leave behind this dreadful, toxic reality. The truth is always so simple and so outrageous at the same time.

Below, I have published a commentary from Bloomberg that elucidates very well and surprisingly frankly how the banks are now collapsing under their bad loans and assets which nobody wants to buy in a rapid downward “liquidity debt spiral“. Please observe that this is exactly the term which I first introduced as “financial apoptosis” a few days ago in a discussion with Brad. And please do not tell me this is a coincidence after Brad has explained and proved to you how we gestalt the precious metals and other financial markets since 2015 in a most significant and decisive manner as incumbent Logos Gods of Gaia.


Liquidity Death Spiral Traps Credit Suisse

Lisa Abramowicz, March 23, 2016


Credit Suisse just got caught up in the same liquidity death spiral that has claimed a growing number of debt funds.

Some of the bank’s traders increased holdings of distressed and other infrequently traded assets in recent months without telling some senior leaders, Credit Suisse CEO Tidjane Thiam said on Wednesday in a Bloomberg Television interview. This is bad on several levels. For one, it highlights some pretty poor risk management on the part of senior officers at the Swiss bank.

But perhaps more important from a market standpoint, it exposes a trap in the current credit market: Traders are getting increasingly punished for trying to sell unpopular debt at the wrong time. The result has been a growing number of hedge-fund failures, increasing risk aversion by Wall Street traders and further cutbacks at big banks.

This all simply reinforces the lack of trading in less-common bonds and loans. At best, this spiral is inconvenient, especially for mutual funds and exchange-traded funds that rely on being able to sell assets to meet daily redemptions. At worst, it could set the stage for another credit seizure given the right catalyst — perhaps a sudden, unexpected corporate default or two, or the implosion of a relatively big mutual fund.

To give a feeling for just how inactive parts of the market have become, consider this: About 40 percent of the bonds in the $1.4 trillion U.S. junk-debt market didn’t trade at all in the first two months of this year, according to data compiled from Finra’s Trace and Bloomberg. While corporate-debt trading has generally increased by volume this year, more of the activity is concentrated in a fewer number of bonds.

This has made it even harder for big banks to justify buying riskier bonds to make markets for their clients, the way they used to, because they could get stuck holding the bag. That’s what happened with Credit Suisse, apparently. The bank suffered $258 million of writedowns this year through March 11, and $495 million of losses in the fourth quarter, because of its holdings of distressed debt, leveraged loans and securitized products, including collateralized loan obligations, according to a Bloomberg News article by Donal Griffin and Richard Partington.

Credit Suisse is in a tough spot because it is trying to get out of its hard-to-trade assets at a bad time. It’s re-evaluating its business model under new leadership, higher capital requirements and the shadow of poor earnings.

But it’s certainly not alone in feeling the pain from a brutal and unforgiving period in debt markets. JPMorgan, Chase, Bank of America and Goldman Sachs are expected to report disappointing trading revenues in the first three months of the year, and Jefferies already reported its train wreck of a quarter.

This difficulty on Wall Street may eventually trickle down to mutual-fund investors, along with anyone else who buys riskier corporate debt. Here’s why: It has become progressively more difficult to execute a trade in the past six months, especially because banks are much less willing to complete a transaction without lining up a buyer. That can take time, and, done poorly, can move the market away from the buyer or seller before the trade is finished.

“The biggest issue that the market kind of faces is that you have an increasing amount of participants that require daily liquidity in an asset class that really doesn’t offer daily liquidity any more,” said Michael Pohly, the portfolio manager at hedge fund Kingdon Credit.

That’s a little scary. The good news so far is that these trading woes haven’t yet triggered another credit crisis. The bad news is it’s only getting harder to transact in riskier debt, making the market increasingly fragile and prone to seizures going forward (i.e. sudden bank apoptosis is looming on the horizon, note, George).

Read also:

Canada to introduce “bail-in” bank recapitalization legislation

Kanada: Sparer werden bei Bank-Pleiten zur Kasse gebeten

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