Thursday, 24 November 2011

Latvian bank run - photos

Latvian bank run

(Translation from Latvian)Across the country to "Latvian Savings Bank" branches on November 23 people gathered to withdraw their money from ATMs. Also at the Savings Bank branch Jekabpils Friendship Alley from 6:00 o'clock on the morning line began to form, and at about 9:30 there's a long line stood more than 100 people who were waiting for money from an ATM costs. neapsīka Row after lunch time, and all day at the cash machine was standing about 100 people. the line was also young people, but the majority, however, was retired. while waiting for their turn, people discussed the latest developments "Latvian Krajbanka "and ruled on the future fate. The media have reported that individuals' Latvian Savings Bank "ATMs from today will be able to withdraw cash 50 lats per day. At first it was intended that the money can be withdrawn from 9:00 in the morning, but for technical reasons, ATMs began work around 9:30. The tomorrow, November 24, people will be able from the "Latvian Savings Bank" ATM to withdraw cash 50 lats ($95). It should be noted that the other bank ATM Savings Bank money can not be removed, it can only be of the "Latvian Savings Bank" ATMs.

Thursday, 3 November 2011

"Take some money out"

Greeks’ worst fear is run on banks

In July, Dimitris Kastriotis’ 80-year-old mother received an unusual pitch from her bank manager.He was not asking her to refinance a loan or sign up for a new credit card. “He said: ‘Take some money out,’” recalled Mr Kastriotis, an Athens lawyer.

That friendly warning was meant to protect an ageing customer from the risks of a fully fledged run on Greek banks, a worry that has stalked the country’s strained financial system as the crisis has dragged on.

Tuesday, 1 November 2011

Run first... vote later

Greece's planned referendum on the latest bailout, announced as polls show its citizens reject it, has thrown the whole pack of cards up into the air. Bank runs, disorderly default, a Greek exit from the euro and vicious contagion elsewhere no longer look like wild scenarios.

If the Greeks vote No in a referendum that is likely to take place in January, that aid may also disappear. Given that Athens only has enough money to pay its bills until early next year, it could then be forced into a disorderly default. The country's banks would then go bust because they hold huge sums of Greek government debt, causing the economy to plunge further into the abyss. Greece would have little choice but to quit the euro. But that would bring with it mayhem not least because Athens is still running a primary budget deficit. With nobody willing to provide it with funding, the government would have to embark on even more severe austerity.

Papandreou may hope that such a nightmare scenario will shock his fellow citizens into voting Yes. But such scare tactics could actually trigger problems before the Greeks even have a chance to vote. Depositors have been gradually taking their money out of Greek banks. Faced with the possibility of a No vote, an exit from the euro and the bankruptcy of their banks, a bank run could accelerate. As of August, there was still 189 billion euros of deposits in Greek banks. The European Central Bank would then have to decide whether to allow the central bank of Greece to continue making emergency loans to the country's banks or force their bankruptcy even before the referendum.

From Reuters

Friday, 28 October 2011

A word in your ear...

Want To Defeat The Banks? Stop Participating In The System!

... if we want to fight back against a system we cannot take back through traditional means, then we must learn to walk away. If the system feeds us, clothes us, and shelters us at will, then ordinary protest is pointless. Our tender parts are in a rusty vice on the autocratic workbench and until we pull them out, no amount of screaming and pounding will improve our situation. Independence is won through the constant striving for self responsibility. Freedom is won through a position of personal strength, not weakness and self-enslavement.

Tuesday, 18 October 2011

Poetry Corner

Friday, 14 October 2011

Operation Bank Run - video

Bank Run Rumours - occupy your atm

Asked by if his company is advising any of the companies that have been the focus of the protests, Schiavone said company policy prohibited him from making any comments about their clients. He did say that Listenlogic's clients included Fortune 500 companies covering finance, consumer package goods, healthcare, food and others.ListenLogic, he says, only monitors: it makes no effort to distinguish between threats that are real and those that are false or merely bluster.For example, ListenLogic is warning of a possible run on banks by flash-mob groups trying, en masse, to withdraw their savings from Bank America and other targeted banks. Schiavone says he is seeing an increase in web references to "run on the bank" and "bank transfer"--independent of any mention of Occupy.One such posting, which so far has drawn 100,000 viewers, can be found on YouTube. It purports to show depositors in St. Louis being restrained by a police SWAT team from entering a Bank of American branch.One small problem: The YouTube account isn't true.There's no question that a protest of some kind took place outside a Bank of America branch in St. Louis. But it took place before the existence of the Occupy movement, and no source confirms that it was an effort by depositors to withdraw their money. A spokesman for Bank of America categorically refutes that the incident was a bank run or that depositors were at any time prevented from withdrawing funds. In fact, one of the websites that first reported the incident as a "run," has since recanted its account, admitting that the incident was "not a reflection of Occupy protests."Schiavone shrugs off the distinction between truth and fiction, making the point that anything seen by 100,000 people has the power to inspire imitation, and, in this instance, to be a threat to banks or other financial institutions."Not everything people say on the web is true," he allows. "But social media postings don't have to be true to hurt.

Friday, 12 August 2011

He who panics first, panics best!

Asset/Liability Funding Mismatches: The Major Cause of Institutional “Runs on the Bank”

Modern day banking business models (fiat banking system) fund business investment that often require expenditures in the present to obtain returns in the future (for example, spending on machines and buildings now for production in future years). Therefore, when businesses (banks included) need to borrow to finance their investments, they usually do so on the understanding that the lender will not demand repayment(s) until some agreed upon time in the future. Usually, the farther into the future, the more preferable, thus entities with exposures to business cycles (businesses) often prefer loans with a longer maturity. This longer maturity leads to lower liquidity, which is in the better interests of the borrower. This very same principle applies to individuals seeking financing on the purchase of big ticket items such as real estate, housing, boats, small businesses and cars. The flip side of this equation contains the primary funding source in the fiat banking system, the individual savers (both households and firms). These savers strive for relatively high liquidity due to shorter cycles in their (sometimes sudden) and considerably less predictable needs for cash. The products that serve these needs are the demand accounts that commercial banks use as their primary funding source.

Commercial and investment banks (as well as some broker/dealers) profit by acting as intermediaries between short term savers who prefer highly liquid demand accounts and borrowers who prefer to take out long-maturity loans with considerably less liquidity. When things are working as anticipated in the fiat banking system, banks acting as intermediaries profit by channelling capital from short term savers to long term borrowers, underwriting and eating the risk of this “asset liability funding mismatch”.

Banks also carry on their capital intensive businesses (ex. trading, market making, etc.) in a similar fashion by borrowing heavily on the short end of the yield curve on a relative sliver of equity and investing in the longer end of the curve or in more volatile, risky asset classes (i.e. public equities, private equity, real assets, commodities, etc.)

The premise behind the fractional reserve (a system where only a fraction of deposits are required to be kept in house as reserves against deposit demands)/fiat banking system is that under ordinary circumstances, savers' unpredictable needs for cash are unlikely to occur at the same time. This premise has been justified by the theory that depositors' needs reflect their own and mostly unique individual circumstances. The fiat/fractional reserve banking institution, by accepting deposits from myriad and differing sources, assumes risk has been effectively diversified away, with the bank expecting only a small fraction of withdrawals in the short term at any given time. This is despite the fact that all depositors have the right to take their deposits back at any time. Adherence and acceptance of the logic behind the fractional reserve system allows fiat banks to make loans and investments over a long horizon, while keeping only relatively small amounts of cash on hand to pay any depositors (and counterparties) that wish to make withdrawals, capital calls or collateral calls.

Traditional views on this “bank run model” largely (or more aptly, only) consider individual savers in the form of depositors on the short side (liquid liabilities). It is a run such as this that caused the banking collapse during the US Great Depression. The modern central banking system has proven resilient enough to fortify banks against depositor runs, as was recently exemplified in the recent depositor runs on UK, Irish, Portuguese and Greek banks – most of which received relatively little fanfare. Where the risk truly lies in today’s fiat/fractional reserve banking system is the run on counterparties. Today’s global fractional reserve bank get’s more financing from institutional counterparties than any other source save its short term depositors. In cases of the perception of extreme risk, these counterparties are prone to pull funding are request overcollateralization for said funding. This is what precipitated the collapse of Bear Stearns and Lehman Brothers, the pulling of liquidity by skittish counterparties, and the excessive capital/collateralization calls by other counterparties. Keep in mind that as some counterparties and/or depositors pull liquidity, covenants are tripped that often demand additional capital/collateral/ liquidity be put up by the remaining counterparties, thus daisy-chaining into a modern day run on the bank!

This phenomena essentially discredits the thinking at large and currently in practice that “since individual expenditure needs are largely uncorrelated, by the law of large numbers” banks should expect few withdrawals on any one day. The fact of the matter is that in times of severe distress, particularly stemming from solvency issues (read directly as the Pan-European Sovereign Debt Crisis, and Greece, et. al. in particular), the exact opposite is the case. Individual depositor and counterparty actions are actually HIGHLY correlated and tend to move in tandem, particularly when that move is out of the target fiat bank. They tend to take heed to the saying “He who panics first, panics best!"

Asset/liability mismatch can, at the margin nearly assure a Lehman-style fiasco in the case of an impetus that sparks herding mentality, whether it be among depositors/savers or institutional counterparties.

Since banks both lend out and often invest at long maturity, they cannot quickly call in their loans or sell their investments. This scenario is exacerbated when said loan and/or investments have materially dropped in value causing a capital gap in between what said loans/investments can be called in for, and what is actually owed to the short term creditors. Again, this is a perfect example of what happened in the US with AIG, Lehman Brothers and Bear Stearns. Therefore, if a significant portion of depositors or counterparties either attempt to withdraw their funds or raise collateral/capital requirements simultaneously, a bank will run out of money long before it is able to pay all of its short term the depositors. The bank will be able to pay the first depositors who demand their money back, but if all others attempt to withdraw too, the bank will be realized insolvent and the last depositors will be left with nothing. It is for this reason that short term creditors tend to “panic first” in an effort to “panic best”, leading to a chain reaction that perpetuates a bank run. Essentially, the fiat/fractional reserve banking system creates a self-fulfilling prophecy wherein each depositor/counterparty's incentive to withdraw liquidity and funds depends on what they expect other depositors/counterparties to do. If enough depositors/counterparties expect other depositors to withdraw their funds, then they all have an incentive to rush to be the first in line to withdraw their funds. “He who panics first, panics best!"

The Black Swan is on the Wing

Saturday, 6 August 2011

Thursday, 4 August 2011

Wednesday, 3 August 2011

silent bank run

Greece in panic as it faces change of Homeric proportions

Fear is driving a silent bank run in Greece – but some see the government's austerity plans as a chance to transform. Worried about whether the banks will stay in business, Greeks have been taking their life savings out of accounts and sticking them in metal slits in basement vaults.

The boxes are so popular that the bank has doubled the rent on them in the past year – and still every day between five and 10 customers request one. This bank ran out of spares months ago. The clerk leans over: "I've been working in a bank for 31 years, and I've never seen a panic like this."

Tuesday, 26 July 2011

Banking for Beginners

The Eleventh Marble
Any five-year old child knows that if you put ten marbles into a tin can, you can only take ten marbles back out. No amount of wishful thinking, dreaming, or praying, will yield that eleventh marble from inside that can. That eleventh marble does not exist. It never did, and it never will. All discussions about the eleventh marble are the product of imagination. The eleventh marble is a fantasy.

Private central bankers issuing the public currency as interest-bearing loans operate on the belief that they can put ten marbles (dollars) into a tin can (the world) and magically get 11 marbles back out.

Wednesday, 1 June 2011

Greek run update

They lifted 1.5 billion Thursday and Friday from banks

From early morning to counter the banks there is serious pressure for withdrawals of deposits, especially small amounts. It is significant that Thursday and Friday, banking sources estimate that rose around 1.5 billion euros in total! According to the same month in May estimated the outflow estimated at least 4 billion from 2 billion in April ...

The majority of depositors rushed to withdraw for pensioners and small savers and amounts ranging from 2-3000 lifted until 10 -15 000 euros. Motivation in most cases it was the fear that led the country into bankruptcy, deposits frozen even temporarily left without cash, or even lose their savings.

(via Google translate)

Keep on running!

Fears grow over Greece bank run as country seeks bail-out

Greece's banks are being hammered by a run on their reserves, leaving the country's main lenders increasingly reliant on the European Central Bank for funding.
The latest figures from the Bank of Greece paint a grim picture, with foreign lenders and individuals withdrawing funds from Greek banks at an alarming rate.
Simon Ward, chief economist at fund manager Henderson, likened the situation to Britain's Northern Rock, which was eventually nationalised to save it from collapse.

Sunday, 10 April 2011

Iceland: where no means no

Deposits accord rejected by Iceland's voters

Icelanders have rejected a depositor claims agreement with Britain and Netherlands for a second time in as many years as voters signalled they did not want tax funds to cover foreign losses by a private bank.

Sounds reasonable to me...

Saturday, 19 February 2011

Korean Worries

Bank run fears engulf savings bank industry

More than a thousand customers lined up in front of the Busan II Savings Bank located in Busan yesterday as soon as the nation’s financial regulator announced a six-month business suspension of Busan Savings Bank and its affiliate Daejeon Mutual Savings Bank.

The line formed by depositors extended about 100 meters (328 feet) from the door of Busan II Savings Bank. “You won’t be allowed to withdraw your money if you are just standing there without a queue ticket number,” a bank employee told the crowd using a microphone.

Those without a ticket then headed to the automated teller machines to withdraw their money, but the machines quickly ran out of cash.

“I’ve saved 40 million won ($35,810) over my whole life. That money was going to be used for my grandson’s marriage but I cannot trust these people [bank employees] saying that I am guaranteed to get my money back,” said Cho So-young, 79.
Bank run fears engulf savings bank industry

More than a thousand customers lined up in front of the Busan II Savings Bank located in Busan yesterday as soon as the nation’s financial regulator announced a six-month business suspension of Busan Savings Bank and its affiliate Daejeon Mutual Savings Bank.

The line formed by depositors extended about 100 meters (328 feet) from the door of Busan II Savings Bank. “You won’t be allowed to withdraw your money if you are just standing there without a queue ticket number,” a bank employee told the crowd using a microphone.

Those without a ticket then headed to the automated teller machines to withdraw their money, but the machines quickly ran out of cash.

“I’ve saved 40 million won ($35,810) over my whole life. That money was going to be used for my grandson’s marriage but I cannot trust these people [bank employees] saying that I am guaranteed to get my money back,” said Cho So-young, 79.

African runner

Ivory Coast Banks, Stock Exchange Close Amid Bank Run

Ivory Coast’s financial system is grinding to a halt with banks closing and the stock market suspended, sparking a run on the lenders left open as the West African nation’s political crisis drags on.

Abou Traore, a 31-year-old police officer, said he tried to close his account and withdraw all his money at a branch of SGBCI, the unit of France’s Societe Generale in Ivory Coast. The lender denied the request, he said, “because it doesn’t have enough liquidity.” The gate to a cash machine outside its main branch was also locked.

Wednesday, 2 February 2011

pyramid scheme

Egypt central bank says banks liquid for Sunday reopening

CAIRO, Feb 2 (Reuters) - Egypt's central bank reassured investors that the country's banks will have enough funds to deal with a possible run when they reopen on Sunday after a week-long closure caused by anti-government protests.

Bankers have warned that investors and Egyptians, spooked by protests that have closed down much of the economy since they broke out on Jan. 25, will seek to send funds abroad or convert them into cash.

"We are expecting that transfers out of the country and dollarisation will be unprecedented," said a treasury dealer at a medium sized bank in Cairo.

"Bank runs are the major concern -- whether the banks will have enough cash in their branches to pay depositors. You should expect long queues," he said.

Friday, 7 January 2011

Waiting for the big one... or already heading for the hills?

Swiss bank vaults filling up ... with our deposits

The Swiss franc is the canary in the coal mine of Europe finance. Every time there is a crisis anywhere in Europe, money flows into Switzerland. It is the ultimate save haven. Having worked for a Swiss bank, I remember seeing this first-hand. A wall of money swept through the bank's coffers at the first sign of trouble.

However, according to friends who work here in the Swiss banking business, this time has been different. Today the deluge of European cash is reaching unprecedented proportions. They have never seen such sums before. They are all waiting for "the big one". The big one is not Portugal or even Spain, for the Swiss bankers the big one to go will be Italy.

When Berlusconi goes... so does the euro.

This is the logic of capitalism. When you pile more and more financial burdens on the population in order to bail out the banks and to guarantee banks, the chances of the population being able to pay all this back diminish. This increases the risk. As the risk increases, capital gets scared and leaves. There is a well-established pattern in this development.

First to leave is professional capital. This is the money in the stock market which goes. Then money leaves the bond market. The bond market shuts down. Then the big corporate deposits leave as financial directors of large companies decide that they are not being paid for the risk of holding assets in the crippled banking system. Ultimately, this fear permeates down the food chain and ultimately the ordinary depositors up sticks and head for the hills.

Can't put it clearer than that!

Wednesday, 5 January 2011

2011: Year of the bank run

2011: Year of the bank run?

"Facing facts like these, each morning when I wake up I have to wonder, 'Why is today not a good day for a wholesale run on the Irish banking system?'" asks Scott Minerd, chief investment officer at Guggenheim Partners. "And if there is a wholesale run on the Irish banking system, then what stops the same scenario from cascading into Portugal, Greece, Italy, and most importantly, Spain?"

Happy New Year!

The American Dream

Great new animated film - watch and get informed!