Can you say ‘massive bank-run’? I knew you could.
I and others have written on the drain of deposits from EU-area banks. Now Bloomberg has it up on their page, on the front.
An accelerating flight of deposits from banks in four European countries is jeopardizing the renewal of economic growth and undermining a main tenet of the common currency: an integrated financial system.
A total of 326 billion euros ($425 billion) was pulled from banks in Spain, Portugal, Ireland and Greece in the 12 months ended July 31, according to data compiled by Bloomberg. The plight of Irish and Greek lenders, which were bleeding cash in 2010, spread to Spain and Portugal last year.
This is the stuff that a currency crisis and bank panics are made of.
This is a big deal as it means that the banking system has had its capital destroyed and replaced with printed credit.
Exactly where the point is that revulsion occurs and the banks and governments related to this collapse is unknowable, but that it will eventually happen if this continues is not speculative at all. It will, just as night follows day.
Banco Santander SA (SAN), Spain’s largest bank, lost 6.3 percent of its domestic deposits in July, according to data published by the nation’s banking association. Savings at Banco Popular Espanol SA, the sixth-biggest, fell 9.5 percent the same month.
In one month?!
This is most-assuredly not priced in.
Everyone wants to pretend that the EU banking system is in “good shape.” The truth is something else entirely; leverage ratios are completely out of whack and now to add insult to injury we have capital being replaced with printed credit.
This is a dynamically-unstable system that requires very little to go completely out of control.