Unión bancaria: revisión de activos bancarios podría detonar siguiente crisis

Genevieve Signoret & Patrick Signoret

Christopher Mahoney escribe en Project Syndicate que la revisión de la calidad de activos (asset quality review) de los bancos que estarán bajo supervisión del Banco Central Europeo (BCE), a llevarse a cabo a principios del próximo año, puede detonar la siguiente crisis bancaria. El BCE aceptó ser el supervisor único a condición de que, tras una revisión exhaustiva de los activos bancarios, se recapitalice a los bancos enfermos antes de que comience formalmente la unión bancaria europea (European Banking Union, EBU). El problema, dice Mahoney, es que si la revisión es honesta, encontrará que harán falta cientos de miles de millones de euros para recapitalizar a los bancos. En pocas palabras, se pondrán al descubierto enormes pérdidas presentes actualmente, pero ocultas, del sistema bancario europeo. Wolfgang Münchau en junio había estimado que las pérdidas de los bancos de la eurozona sumaban no menos que un billón de euros, y probablemente más. Münchau, por cierto, duda que la revisión del BCE sea honesta.

Christopher Mahoney en Project Syndicate:

Europe plans to form a Eurozone Banking Union (EBU) next year. The plan provides for a Single Supervisor for big banks (the ECB), and for a Single Resolution Mechanism that would be able offer ESM assistance in failed bank resolutions. The ECB agreed to take on this thankless task on one condition: that sick banks must be resolved prior to EBU. In order to fulfill that condition, the ECB will supervise comprehensive portfolio reviews for the big banks. Unlike prior reviews which were macro and top-down, these reviews will be loan-by-loan, and will utilize third party professionals uncontaminated by local political pressures.

This situation is analogous to the nursing home agreeing to admit Grandma, so long as she can run a few laps around the track. The purpose of EBU is to break the credit linkage between Club Med governments and banks. The idea is that, once EBU is up and running, banks will be much less of a contingent liability for the governments and their debt ratios. But the plan assumes that the bad banks will be resolved now, before the linkage is broken.

There are two reasons why this plan won’t work:

1. If the reviews are honest, the recap bill will be in the hundreds of billions. By honest, I mean marking bond portfolios to market or assigning loss reserves against them. Plus the big real estate cover-up will have to end: no more refinancing with new money; no more accrual of unpaid interest; no more sanitizing toxic exposures by converting them into covered bonds. So, if the reviews are honest, and the price tags are dumped on the governments (or bondholders) the crisis will resume.

2. Even after EBU, the government credit linkage will remain because (1) the governments will still be expected to contribute in future resolutions; (2) the ESM is tiny in relation to the scale of the system; and (3) the SRM is predicated on depositor bail-ins which will destroy the banking systems, as it has in Cyprus.

Wolfgang Münchau en Financial Times:

So how much recapitalisation can we expect? The French newspaper Les Echos last week produced an estimate of the total assets of the bad banks that have been set up to absorb losses from the housing crash and the US credit crisis. That estimate alone is more than €1tn – though it includes the UK. How much of these assets are ultimately underwater is anybody’s guess. But you could safely assume that quite a lot of this stuff will ultimately be worthless.

This estimate only relates to the bad banks. You have to add actual and hidden losses from the rest of the banking system. We do not know how big these are since hidden losses are, by definition, hidden. To disguise a loss, banks use tricks such as “pretend and extend”: lenders can decide to renew a non-performing loan that technically becomes good again the moment the new loan is struck – at which point the borrower will technically not be in default.

One would hope that an asset quality review by the European Central Bank, envisaged for next year, would provide clarity. But I am doubtful. In the past, bank transparency exercises were undertaken with the intention of hiding the truth. Remember the stress tests of 2011? Or the apparently independent audit of the Spanish banking system, which concluded that Spanish banks only needed a teeny weeny bit in new capital?

What makes me specifically doubtful about the ECB’s exercise is that I cannot see the central bank conceivably coming up with a number that is larger than the available capital.

[…] On their own, the bad banks constitute about 5 per cent of eurozone banking assets. If you add another 5 per cent from hidden losses, the losses still being generated by the double-dip recession, and future losses through the bail-in of investors, you arrive at €2.6tn. Not all of these losses will have to be made good through a recapitalisation. Some banks may have some capital reserves. Other banks may be closed. But that just distributes the losses from one end of the banking sector to another.

Assume now that my estimate is wildly wrong, and deduct the size of the Italian economy from that back-of-the-envelope number. You still end up with €1tn. With this order of magnitude it mattered relatively little whether the ESM could contribute €60bn, €80bn or zero. Europe’s national governments are clearly incapable and unwilling to fill the gap. And without the money for bank resolution, it barely matters whether the European Commission will become the resolution authority that does not do the job or whether someone else does not do it.