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Greek Bets Sank Top Lenders
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The Bank of Cyprus and the Cyprus Popular Bank (Laiki Bank), passed stress tests given by the EU in 2010 and 2011. By the end of 2010- even as other banks such as Barclays were cutting their Greece government bonds by over 50%- the two banks held 5.8 billion euros of Greece bonds, over $1 billion euros larger exposure to Greece than nine months earlier, according to European regulators. Regulatory supervision failed to alert the banks and the banks risk management failed to see the warning signs in Greece. The Laiki Bank Risk Officer went in the opposite direction actually increasing exposure to Greece, saying in a conference call in August 2010, that he had used the bank's capital position "to deepen selectively some highly profitable client relationships." What went wrong with the stress tests by the EU regulators in July 2010 of these two banks, was that the tests looked at what would happen if economic conditions deteriorated, but did not consider the possibility that government bonds could produce losses. The two banks suffered total booked losses of 4.3 billion euros in 2013 from holdings of Greece bonds. The EU stress tests of July 2010 showed the two banks having total of 572 million in surplus capital. The two banks then went on to issue dividends in 2010-2011 totalling 141 million euros. By March 2013 the Laiki Bank was "on respirator" for a few months, according to the Central Bank of Cyprus, until the 10 billion euro EU bailout in March 2013 with the closing of Laiki Bank and the sharp downsizing of Bank of Cyprus.
Cyprus Popular Bank (Laiki Bank) and the Bank of Cyprus 2006-2013- the path leading to the EU bailout of 2013
07/16/2011
Cyprus Popular Bank and the Bank of Cyprus passed EU stress test in 2010 and 2011, resulting in the banks issuing dividends and increased their holdings of Greece's bonds even as the Greece faced a financial crisis in 2010. The losses from Greece bonds totalled 4.3 billion euros for the two banks in 2013, leading to the closing of Laiki Bank and the downsizing of the Bank of Cyprus under an EU bailout. The bank also made other risky investments in Greece, with the chief risk officer of Laiki Bank taking on more risks in 2010-2011 even as other European banks were reducing their investments in Greece.
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The 2010 and 2011 EU stress tests that failed of Laiki Bank and Bank of Cyprus- origins of the banking crisis in Cyprus
07/16/2011
The two Cyprus banks passed the EU's 2010 stress tests, and passed them again in 2011, going on to give out dividends and increase their exposure to Greece, even as Greece faced a deepening financial crisis. The two banks increased their holdings of Greece's bonds by $1 billion in 2010, according to EU regulators, and took on more risks. The EU stress tests looked at how the banks would do in deteriorating economic conditions but did not consider the possibility of losses from sovereign government bonds.
Grouped Articles
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Piraeus Bankâs Michalis Sallas Reaches the Top in Greece
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Stress Tests Won't Prevent the Next Financial Crisis
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Banks, Regulators Still Jostling Over EU Stress Tests
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Europe Needs Lesson in Stress Management
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Fears that Basel III and European Banking Authority E.U. Stress Tests may not adequately reflect the risks on banks balance sheets.
01/21/2010
The situation after bailout of Irish banks in November 2010 by the EU. The Irish banks had passed European stress tests. Portuguese and Spanish banks may face a similar situation.
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Merkel Backs Bond-Buying Program
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The views of the IMF, ECB and the governments of Germany, Netherlands, Baltics, on the bailout in Cyprus
03/25/2013
The IMF pushed for investors to share the cost of a bailout in Cyprus. The Netherlands finance minister who heads the EU finance ministers group pushed strongly for this. The president of Estonia was quite vocal about the fact that Russian oligarchs were using Cyprus as a tax haven. He said the EU could not agree to "money laundering."
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Germany Faces Criticism in Cyprus for Policies on Bailout Program
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Wall Street Journal 03/28/2013
Russia's banking connection with Cyprus
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Russia Denounces Deposit-Tax Plan
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Wall Street Journal 03/25/2013
Wall Street Journal 03/26/2013
Wall Street Journal 03/28/2013
Cyprus Capital Controls Come Years After They Were Needed
New York Times 03/28/2013
The events leading to the March 25, 2013, 10 billion euro bailout of Cyprus
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Cyprus Heads Toward Exit, Leaving Greece as Last Bailout Member
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Wall Street Journal 03/26/2013
In Cyprus, Big Losses Expected on Deposits
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Germany Faces Criticism in Cyprus for Policies on Bailout Program
New York Times 03/27/2013
Wall Street Journal 03/28/2013
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European Banking Authority E.U. Stress tests for banks in 2010 and 2011
10/02/2009
Stress tests for banks in Europe in July 2010 and in 2011.
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Document Contradicts EU Bank Statement
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Moody's Questions Spanish Banks
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Stress-Testing of stock and bond portfolios
05/02/2011
Jonathan Burton of Market Watch in San Francisco quotes Peter Bernstein and other experts on dealing with today's volatile environment with risks and daily news reports about jobs, inflation, bubbles, eurozone default risks, China slowdown, and interest rate risk.
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Unknown 08/05/2011
The European Banking Agenda in 2012-2014- deposit insurance and powers of banking supervision transferred to a European supervisory authority
03/03/2010
On the agenda during discussions in June between the EC, ECB and the German government, is deposit insurance for eurozone banks, and a supervisory financial authority for eurozone banks (Single Resolution Mechanism) within the EC with powers transferred from sovereign states to the the supervisory banking authority. These issues take priority because of fears of bank runs on banks in Greece, Spain and other countries. France is pushing for a new Eurozone Architecture that will form the basis of the euro currency.
Grouped Articles
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New York Times 07/12/2013
Wall Street Journal 03/03/2010
The Man Whoâll Do Triage on Europeâs Banks
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ECB Nominates French Regulator for Euro-Zone Post
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ECB Nominates New Banking Regulator
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