Deutsche Bank “Is Probably Insolvent”

This is getting to be a habit. Previous late summer holidays by this correspondent coincided with the run on Northern Rock, and subsequently with the failure of Lehman Brothers. So the final crawl towards the probable nationalisation of Deutsche Bank came as no particular surprise this year, but it is tiresome to relate nevertheless.

The 2015 annual report for Deutsche Bank runs to some 448 pages, so one rather doubts if even its CEO, John Cryan, has read it all, or has a complete grasp of, for example, its €42 trillion in total notional derivatives exposure.

‘It’s time to hold physical cash,’ says one of Britain’s most senior fund managers

It may be time to money under the mattress. High profile fund managers explain how to prepare for a ‘systemic event’

The manager of one of Britain’s biggest bond funds has urged investors to keep cash under the mattress.

Ian Spreadbury, who invests more than £4bn of investors’ money across a handful of bond funds for Fidelity, including the flagship Moneybuilder Income fund, is concerned that a “systemic event” could rock markets, possibly similar in magnitude to the financial crisis of 2008, which began in Britain with a run on Northern Rock.

“Systemic risk is in the system and as an investor you have to be aware of that,” he told Telegraph Money.

Fitch says China credit bubble unprecedented in modern world history

China’s shadow banking system is out of control and under mounting stress as borrowers struggle to roll over short-term debts, Fitch Ratings has warned.

The agency said the scale of credit was so extreme that the country would find it very hard to grow its way out of the excesses as in past episodes, implying tougher times ahead.

“The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation,” said Charlene Chu, the agency’s senior director in Beijing.

“There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling,” she told The Daily Telegraph.

Turk – Unspeakable Financial Destruction Is Headed Our Way

“What Cyprus makes clear is the realization that there is not enough money in the world to bail out the banks.  So to keep the political experiment called the European Union alive, the oligarchs in Brussels have now resorted to stealing depositor money.

The important point here is if they can steal it in Cyprus, they can do the same in Spain, Italy or any other country where the banks are insolvent, and the reality is that most of the global banking system is insolvent.  But sometimes it takes a while for a lesson to sink in.  Some people began recognizing the counterparty risk that comes with bank deposits when Northern Rock collapsed in 2007, and the point was driven home again in 2008 with the Lehman debacle.

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More details about the Cyrus bank collapse are starting to emerge, Eric, and it is not a pretty picture.  Depositors in those banks are going to lose a lot of money.  At Laiki Bank, which was the second biggest in Cyprus, the confiscation of depositor money went from 9.95% to what officials are now saying will be 80%.