A day of rumours.
Two banks at opposite ends of the European spectrum are in need of funds. At the bottom, the undisputed champion of barrel scraping imbecility, Anglo Irish. Bleeding from every orifice, it will have to get a straight bail out from the ECB. Whether a full and large bail out would be laundered through the Irish Central bank to pretty it up for the public, matters little.
That such a bail out/recapitalization, call it what you will, is on its way seems more likely than ever after rumours today in the Irish press that the ECB intervened yesterday to buy Irish Bonds directly. Usually the ECB accepts bonds as collateral that other people have bought and has refrained from buying directly. The rumour is it was done to remind the market that the ECB is there, able and willing to step in, and was done to help stabilize the continuing rise in Irish borrowing costs. If true, this has a much more direct and ‘concerned’ feel about it.
At the other end we have the stern mightiness of Deutsche Bank. Who have broken their long silence to say they are ‘thinking’ of raising €9 billion via an IPO. That’s quite a lot of money.
Rumour is this is Deutsche getting in ahead of what might be a long list of banks who will have to raise capital holdings to comply with the Basel III bank rules. The new rules are not quite agreed yet and would give banks with many years to comply. But of course, if a bank can say, ‘we we already meet the higher standards’, this might give that bank a competitive edge. Especially if that bank were to think there might be difficult times ahead.
But would they think such a thing?
Well people have been wondering why M. Trichet of the ECB decided this week to say so forthrightly in public that he would like to see that countries NOT complying with EC public spending and debt regulations should have their voting rights temporarily suspended. This would mean a country such as Greece would find its future being discussed and decided at EU meetings at which it could no longer vote.
It seems likely this is directly connected to the visit today by Eurostat officials trying yet again to force the Greek government to finally tell them the whole truth about Greece’s actual debt liabilities. The rumour is that Greece has STILL not told the whole truth and that when/if it is finally forced to, Greece’s debt level will be revised upward AGAIN.
Such a revision to their debt might similarly shake confidence in a few European banks whose own exposure to Greece’s actual debt might also get a sudden revision upward. Such banks might be thinking to themselves that it might be prudent to have a little more cash on hand.