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The EU Defends Its Increasingly Bankrupt Financial System

Jan. 5, 2017 (EIRNS)—A Basel, Switzerland meeting to find an agreement on new capital rules, scheduled for Jan. 8, was indefinitely postponed Jan. 3. The issue is so-called internal methods for risk-weighing, which the United States wants to practically eliminate and the Europeans (especially German banks) want to keep. If U.S. criteria for leverage are adopted, it is calculated that German banks must increase their capital 16% (Bloomberg).

Currently, according to Basel-defined rules for leverage exposure, level 3-ridden Deutsche Bank is less risky than Unicredit, and all major European banks, including Italy's Monte dei Paschi di Siena, are less risky than the average of U.S. banks.

Meanwhile, the European Central Bank updated figures show that the ECB is becoming the European Central Hedge Fund. December figures for its Assets Purchase Program (APP), show that the ECB owns now a total of €1.532 trillion assets, most of which are sovereign bonds (€1.254 trillion). Of the latter, first come German bonds (€303 billion), then French bonds (€240 billion), Italian bonds (€209 billion), and Spain (€150 billion).

The ECB has covered bonds for €203 billion, corporate bonds for €51 billion and asset-backed securities for €22 billion.

The ECB has already announced that it will purchase another half a trillion in assets in 2017 and might extend the APP program even further.

While the ECB is providing zombie banks with life-support measures, the reality of the financial crisis is indicated, among other things, by growing imbalances of Target 2, the clearing system among central banks in the Eurozone which measures capital flight. Target 2 showed an all-high credit €750 billion for the Bundesbank and a €350 billion debt for Italy.