March 31st, 2011 11:17:30 GMT.

Portuguese FinMin: Talks with Eurostat changed calculation method on deficit for 2010

by

That would be it then ;)  Phew,  I was a bit worried there for a minute.

  • State intervention in BPN, BPP banks led to higher deficit
  • Impact on public accounts from banks limited to 2010
  • Calculation changes do not put 2011 budget goal at risk 
  • Higher deficit not result of any “secrets,” just calculation change
  • Everything worse after austerity measures rejected
  • Govt doesn’t have the power/legitimacy to request any aid
  • Govt has necessary financing conditions until new govt takes power

2011-03-31T11:17:30+0000

March 31st, 2011 11:15:18 GMT.

ECB Weber Criticizes Ireland For Blank Check To Bank Sector

by

BERLIN (MNI) – ECB Governing Council member Axel Weber on Thursday
criticized the Irish government for having given a full guarantee for
the banking sector of the country.

“The failure of a bank is as normal as the success of a bank,”
Weber said in a panel discussion at a banking conference here. “I do not
think it is necessary to give a blank guarantee” for banks, he stressed.

Commenting on the sovereign debt crisis in the Eurozone, Weber
reaffirmed his opposition against purchases of government bonds by the
ECB, the European Financial Stability Facility (EFSF) or the future
European Stability Mechanism (ESM). This would set the wrong incentives
for indebted countries, he argued.

Weber said he was more worried about the narrow bond spreads of the
past in the Eurozone — which were an underpricing of risks — than
about the current large spreads. While the current “overshooting” of
spreads will still last for a while, the markets are moving towards a
normalisation of spreads, he argued. In the end, spreads will still be
higher than before the crisis, the outgoing Bundesbank president
predicted.

He criticized the decision not to include a clause under which
future aid from the ESM would automatically require private creditors to
shoulder part of the losses when member states couldn’t pay their debt.
“This needs to be completely automatic; I don’t see any problem with
that,” he said.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

[TOPICS: MT$$$$,M$X$$$,M$G$$$,M$$EC$,M$$CR$,MGX$$$,MFX$$$]

2011-03-31T11:15:18+0000

March 31st, 2011 11:05:19 GMT.

Dutch CBank:At Some Point Risks From Low Int Rates To Win Day

by

FRANKFURT (MNI) – The ECB’s loose monetary policy doubtlessly
helped contain the financial crisis, but ultimately the disadvantages of
maintaining interest rates at a low level will outweigh benefits, the
Dutch National Bank argued Thursday in its annual report.

Crisis measures will come to an end as soon as markets are
sufficiently normalized, the central bank added.

Furthermore, though the world economy is recovering, growth is not
nearly balanced, and in fact macroeconomic imbalances from before the
crisis persist even now.

“Although the loose monetary policy has undeniably contributed to
containment of the crisis, sooner or later the disadvantages of a
sustained policy of low interest rates will get the upper hand,” the
central bank wrote.

“In the first place, it discourages debt reduction. Secondly, a low
key policy rate incites banks to make maximum use of the ECB’s
facilities,” it concluded.

The ECB’s program of buying government bonds is completely
different than the policy of quantitative easing in the United States,
the Dutch Central Bank reiterated.

“All the same, the options at the monetary authorities’ disposal
are gradually being exhausted, also in view of the risks for central
banks’ balance sheets,” the bank said.

“Born from necessity, the said crisis measures will be phased out
as soon as the markets are sufficiently normalised,” DNB added.

Over the long run, “the combination of very loose monetary
conditions, implicit and explicit state guarantees, extensive purchasing
programmes and the associated balance sheet expansion of central banks
could hinder the stable development of the global economy in the longer
term,” the bank argued.

Even though Eurozone inflation has exceeded the “critical limit of
2%,” due to higher energy and food prices, core inflation “is still
quite moderate,” the DNB argued. “And the public’s expectations of
future price developments match the definition of price stability as
used by the ECB.”

“Nonetheless, concerns prevail,” namely from price developments in
emerging countries and “sharply increased commodity prices.”

The bank warned about the risks to the ECB’s monetary policy from
divergences both in growth and price developments in the single currency
area.

“In the second place – and related thereto – the robust economic
upturn in Germany clearly shows that a resurging economy is attended by
a higher inflation rate and hence requires higher key policy rates,” the
bank wrote.

“However, the ECB will not be in a position to meet that need
(fully) if inflation rates elsewhere in the euro area are significantly
lower than 2% and in some countries possibly even negative,” the bank
said.

More worryingly, “The longer this situation persists, the harder it
will become for the ECB to assert its credibility among the citizens of
the largest member state, which is known for its instinctive aversion to
inflation,” the bank cautioned.

“The world economy is recovering, although the growth is still not
balanced,” the DNB said.

“With economic growth of close on 3%, the US seems to be back to
its pre-crisis growth path. However, this figure is partly attributable
to the unprecedented stimuli from the federal government and the Federal
Reserve System,” the central bank explained.

The Dutch bank also raised the possibility that growth might slow
in the world’s largest economy once stimulus is withdrawn. “So part of
the current growth is being bought on tick, and it remains to be seen
how long that can be sustained.”

“As long as the supply of unsold homes continues to expand and the
unemployment rate remains high, no structural improvement in the picture
will occur.”

“All in all, the pre-crisis macroeconomic imbalances are still
firmly in place,” the bank emphasized.

“A new, but not unexpected, factor is the increasing inflationary
pressure in Asia, caused by briskly rising food prices and wages,” it
added.

Higher energy and commodities prices will likely stay for some
time, the central bank predicted, confirming that “part of the rise in
energy and commodities prices can be assumed to be structural.”

“All of this carries risks for the global inflation picture, also
in view of the deficit financing and loose monetary conditions in the
industrialised world, which attract extra capital flows to emerging
markets,” it added.

“In any case, it looks as if the spectre of deflation has made way
for the danger of rising inflation, possibly with the exception of some
seriously affected European countries,” the bank noted.

–Frankfurt bureau, +49-69-720142, tbuell@marketnews.com

[TOPICS: M$$EC$,M$X$$$,MT$$$$,MGX$$$,M$$CR$]

2011-03-31T11:05:19+0000

March 31st, 2011 11:05:17 GMT.

S&P Text: S&P Downgrades Four Greek Banks to B+ – 3

by

FRANKFURT (MNI) – Standard and Poor’s has downgraded four Greek
banks to B+ on Thursday and has kept all the ratings on “watch
negative”.

The following is the third part of a verbatim text of the press
release, detailing the reasons for the individual downgrades:

CREDITWATCH

The negative CreditWatch implications on all of our ratings on the
four Greek banks mirror those on our sovereign ratings on Greece,
indicating the likelihood of a further downgrade of the banks in the
event of another sovereign downgrade.

We could also lower the ratings on the Greek banks if we believe
that the vulnerabilities in their financial profiles to a negative
operating environment and frail market confidence translate into a
weakening of their financials beyond what we currently anticipate.
Specifically, we could lower our ratings on the Greek banks if we
believe that deposit outflows could occur of such a magnitude that
measures beyond ECB support might need to be considered to contain the
impact on these banks’ liquidity position.

We could also lower our ratings on the Greek banks if, in contrast
to our current belief, meaningful operating losses materially impair the
banks’ capital bases, or if asset quality deteriorates more than we
currently anticipate. We believe that public perception of an increased
likelihood of government debt restructuring could have a negative effect
on private sector borrowers’ willingness to pay their debts,
particularly in the context of the Greek private sector’s comparatively
weak payment culture with respect to Western European standards.

The negative CreditWatch listing of UBB primarily reflects that of
its parent, NBG. Our CreditWatch resolution of UBB will therefore depend
on that of NBG, but also on our analysis of UBB’s contingency plans to
replace funding from its parent if such support were withdrawn.

RELATED CRITERIA AND RESEARCH

All of the articles listed below are available on RatingsDirect on
the Global Credit Portal, unless otherwise stated.

* Greece BICRA Changed To Group 7 From Group 5 On Higher Economic
and Industry Risks, March 31, 2011
* Greece Downgraded To ‘BB-‘ On Confirmed ESM Borrowing Terms; Still
On Watch Neg; Teleconference Today At 4:30PM BST, March 29, 2011
* Bank Capital Methodology And Assumptions, Dec. 6, 2010
* Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1,
2010
* Use Of CreditWatch And Outlooks, Sept. 14, 2009
* Group Methodology, April 22, 2009
* Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008
* Bank Rating Analysis Methodology Profile, March 18, 2004
* Sovereign Risk For Financial Institutions, Feb. 16, 2004

[TOPICS: M$$EC$,M$X$$$,M$$CR$,MT$$$$]

2011-03-31T11:05:17+0000

March 31st, 2011 11:05:16 GMT.

S&P Text: S&P Downgrades Four Greek Banks to B+ – 2

by

FRANKFURT (MNI) – Standard and Poor’s has downgraded four Greek
banks to B+ on Thursday and has kept all the ratings on “watch
negative”.

The following is the second part of a verbatim text of the press
release, detailing the reasons for the individual downgrades:

UBB

In our downgrade of UBB today, we have removed the one-notch uplift
over our SACP assessment that we had previously incorporated into our
rating on UBB to account for potential additional parent support. We
have also lowered our SACP assessment by one notch, to ‘b+’ from ‘bb-‘,
to reflect UBB’s reliance on funding support from NBG.

Consequently, our rating on UBB now reflects our assessment of its
SACP and does not incorporate any uplift for potential additional
parental support, even though there are no indications that NBG’s stance
toward support for UBB has diminished. We are concerned, however, that
if NGB faces significantly increased pressure on its own financial
profile, it could withdraw existing support for its Bulgarian
subsidiary.

EFG

The lowering of our long-term rating on EFG primarily reflects our
view of the heightened economic and industry risks in EFG’s home banking
market, posed by developments in Greece’s sovereign creditworthiness. At
their current level, the ratings factor in our opinion of EFG’s high
credit risk profile compared with that of its Western European peers;
significant exposure to Southeastern European markets; imbalances in its
funding profile, which increased rapidly in 2010; deteriorating
financial and asset quality performance; and moderate capitalization.
The ratings are supported by our view of EFG’s strong management team
and sound franchise in its domestic market.

We believe that competition among Greek banks to attract retail
funding will remain harsh in 2011 in a difficult operating environment,
thus maintaining the cost of funding at persistently high levels.
Coupled with declining business volumes in EFG’s domestic market, this
will, in our view, reduce the bank’s loss absorption capacity at a time
when we believe that the cost of risk is set to increase further owing
to deteriorating asset quality. Our current ratings on EFG incorporate
the possibility that the bank may report operating losses in 2011,
though we anticipate that any such losses would remain at fairly
manageable levels of about 35 basis points (bp) of adjusted total
assets. In our opinion, EFG’s problem assets (which include problem
loans past due by more than 90 days, before write-offs) will likely
continue growing in 2011; we factor into the ratings the possibility of
problem assets accounting for about 17% of EFG’s credit portfolio at
year-end 2011. We estimate that EFG’s year-end 2010 RAC ratio before
diversification will likely be about 5.5%, a level that we view as weak.
We also estimate that the expected capital gains from the completion of
EFG’s transaction in Poland, which we believe the bank will realize by
year-end 2011, could represent about 70 bp of EFG’s risk-weighted assets
according to our RAC framework. Given their relatively moderate impact,
these gains would not materially change our view of EFG’s solvency
position.

ALPHA

The lowering of our long-term rating on Alpha primarily reflects
our view of the heightened economic and industry risks in Alpha’s home
banking market, posed by developments in Greece’s sovereign
creditworthiness. The ratings now reflect our view of Alpha’s higher
credit risk profile compared with that of its Western European peers;
greater vulnerability to a weaker economic environment than previously,
which is likely to negatively affect the bank’s profitability and asset
quality; funding imbalances, which increased rapidly in 2010; and risks
arising from exposure to Southeastern European markets. The ratings on
Alpha are supported by our view of the bank’s valuable franchise in its
domestic market and increasingly diversified business profile.

We anticipate that Alpha’s asset quality is likely to deteriorate
further in 2011, on the back of what we see as ongoing deterioration of
the bank’s operating environment in Greece. According to our estimates,
Alpha’s total problem assets (which include problem loans past due by
more than 90 days, before write-offs) could represent about 13% of its
consolidated credit portfolio at year-end 2011. Growth in problem assets
is also, in our view, likely to lead to higher credit provisions this
year, which could end up exceeding the bank’s loss absorption capacity.
We have incorporated into our ratings on Alpha the possibility that the
bank may report operating losses in 2011, though we anticipate that any
such losses would be manageable, representing about 20 bp of adjusted
total assets. We estimate the bank’s RAC ratio before diversification at
6.7% as of year-end 2010. We believe that, at this level, Alpha’s
solvency does not immunize the bank from what we see as heightened risks
related to Greece’s economic and operating environment. Although we view
Alpha as being less exposed than its domestic peers to Greek government
bonds, its portfolio of government debt accounts for a still meaningful
0.9x the bank’s TAC as of year-end 2010, according to our estimates.

PIRAEUS

The lowering of our long-term rating on Piraeus primarily reflects
our view of the heightened economic and industry risks in Piraeus’ home
banking market, posed by developments in Greece’s sovereign
creditworthiness. The ratings also factor in our view of Piraeus’ higher
credit risk profile compared with that of its Western European peers;
exposure to Southeastern European markets; funding imbalances, which
increased rapidly in 2010; and vulnerability to a weaker economic
environment in Greece than in the past few years, which we believe will
likely weigh on its performance and asset quality. The ratings on
Piraeus remain supported by our view of the bank’s good domestic market
position, successful strategy, and focused management.

In our view, further deterioration in Piraeus’ credit portfolio is
likely to push up credit losses in 2011 to levels exceeding the bank’s
loss absorption capacity. At the same time, we believe that declining
business volumes and a still high cost of funding will likely constrain
Piraeus’ revenue stream. Given the negative operating environment we
anticipate in Greece, we are factoring into our ratings on Piraeus the
possibility that the bank may report operating losses in 2011. We
believe, however, that their impact on solvency will remain manageable;
our current ratings on Piraeus incorporate our estimate that, in such a
scenario, net operating losses would not exceed about 35 bp of average
adjusted assets in 2011. We estimate that Piraeus’ RAC ratio before
diversification was 5.9% at yearend 2010. In the first few months of
2011, the bank successfully completed a capital increase; the total
equity raised should, in our opinion, enable Piraeus to increase its RAC
ratios by about 150 bp. Nevertheless, we still believe that Piraeus’
solvency does not immunize the bank from the heightened risks related to
Greece’s economic and operating environment.

–MORE

[TOPICS: M$$EC$,M$X$$$,M$$CR$,MT$$$$]

2011-03-31T11:05:16+0000

March 31st, 2011 11:05:14 GMT.

S&P Text: S&P Downgrades Four Greek Banks to B+ – 1

by

FRANKFURT (MNI) – Standard and Poor’s has downgraded four Greek
banks to B+ on Thursday and has kept all the ratings on “watch
negative”.

The following is the first part of a verbatim text of the press
release, detailing the reasons for the individual downgrades:

Four Greek Banks Downgraded To ‘B+’ After Greece Downgrade And
BICRA Review; All Ratings Still On Watch Negative

* On March 29, 2011, we lowered our longterm sovereign credit
rating on Greece to ‘BB-‘ from ‘BB+’ and maintained it on
CreditWatch negative. At the same time, we placed our ‘B’
short-term sovereign credit rating on Greece on CreditWatch
negative.
* We now believe that Greece’s financial system faces a greater
deterioration in the operating and economic environment ahead and
an increased likelihood of a government debt restructuring.
* We are lowering our long-term counterparty credit ratings to ‘B+’
on the four Greek banks that we rate–National Bank of Greece, EFG
Eurobank Ergasias, Alpha Bank, and Piraeus Bank. Our ‘B’
short-term counterparty credit ratings on these banks are
unchanged. All ratings remain on CreditWatch negative, with the
exception of our ‘CCC-‘ ratings on the banks’ junior subordinated
notes and preference stock.
* The negative CreditWatch implications reflect those on the
sovereign ratings, as well as our opinion of the vulnerability of
the banks’ financials to the negative operating environment in
Greece.

MADRID (Standard & Poor’s) March 31, 2011–Standard & Poor’s
Ratings Services said today that it has lowered its long-term
counterparty credit rating on National Bank of Greece S.A. (NBG) to ‘B+’
from ‘BB+’ and its long-term counterparty credit rating on NBG’s
strategically important Bulgarian subsidiary, United Bulgarian Bank A.D.
(UBB), to ‘B+’ from ‘BB’.

In addition, Standard & Poor’s has lowered its long-term
counterparty credit ratings to ‘B+’ from ‘BB’ on the other three Greek
banks it rates–EFG Eurobank Ergasias S.A. (EFG), Alpha Bank A.E.
(Alpha), and Piraeus Bank S.A. (Piraeus).

All of the ‘B+’ long-term and ‘B’ short-term counterparty credit
ratings on the Greek banks and UBB remain on CreditWatch with negative
implications, where they were placed on Dec. 3, 2010, with the exception
of our ‘CCC-‘ ratings on the banks’ hybrids.

These rating actions follow our recent two-notch downgrade of
Greece (Hellenic Republic, BB-/Watch Neg/B) and the revision of our
Banking Industry Country Risk Assessment (BICRA) for Greece to Group 7
from Group 5 (see our related article “Greece BICRA Changed To Group 7
From Group 5 On Higher Economic and Industry Risks” published today). In
this context, our rating actions on the individual banks primarily
reflect our view of:

* The ongoing deterioration of the economic and operating
environment in Greece, which we believe is likely to weaken the
business and financial profiles of the four Greek banks we rate;
* Further asset quality deterioration in the banks’ domestic loan
books, on the back of a more adverse economic environment in
Greece than we had previously incorporated into our ratings;
* The overall declining profitability we anticipate, mainly due to
pressured revenue generation and growing impairment charges;
* The banks’ high exposure to the Greek government’s weakening
creditworthiness, through their large portfolios of Greek
government debt, which we estimate represent 90%-220% of total
adjusted capital (TAC) for the four Greek banks (with Alpha having
the lowest exposure). In our opinion, these large government debt
portfolios expose the banks to the increasing likelihood of a
government debt restructuring; and * The sensitivity of the Greek
banks’ deposit bases to perceived or real pressures in Greece’s
sovereign creditworthiness, which may trigger renewed pressures on
the banks’ domestic retail funding due to potentially sizable
outflows of deposits.

Our ratings on the Greek banks incorporate our view that the Greek
authorities–in the EU framework–are “supportive” of the country’s
financial system. Consequently, our assessment of the stand-alone credit
profiles (SACPs) of Greek institutions takes into account what we
consider to be the benefits of being a bank in a regulated and
supervised environment, with access to extraordinary liquidity, such as
that provided under the Greek government’s support package and by the
European Central Bank.

NBG

The lowering of our long-term rating on NBG primarily reflects our
view of the heightened economic and industry risks in NBG’s home banking
market, posed by developments in Greece’s sovereign creditworthiness.
Our ratings on NBG reflect our opinion of NBG’s funding imbalances,
which increased rapidly in 2010; higher credit risk with respect to
Western European standards; and weakening financial and asset quality
performance. The ratings are supported by our view of NBG’s dominant
position in the Greek market and its increased geographic
diversification.

We lowered our long-term rating on NBG in line with that on the
other Greek banks we rate given that the deterioration we have observed
in NBG’s financial profile has, in our view, been broadly in line with
that of its peers, whereas we previously incorporated into our rating
greater resilience than that of peers. Specifically, we have seen NBG’s
asset quality deteriorate quickly and funding imbalances accumulate on
its balance sheet. We anticipate continued growth in NBG’s problem
assets in 2011, mainly driven by faster deterioration in the bank’s
domestic loan book. In our opinion, by year-end 2011, problem assets
(which include problem loans past due by more than 90 days, before
write-offs) could reach about 15% of the bank’s consolidated loan book.
We have factored into our ratings on NBG our belief that the bank will
likely maintain positive, though very moderate, consolidated operating
profitability in 2011, mainly benefitting from positive results at its
foreign subsidiaries–particularly at Turkish subsidiary Finansbank (not
rated)–offsetting negative performance in Greece. We regard positively
NBG’s successful rights issue a few months ago, which boosted
capitalization materially. We estimate a total risk-adjusted capital
(RAC) ratio before diversification of 8.2% at year-end 2010. This ratio
is below the regulatory measures, however, owing to the higher weighting
that we assign under our RAC framework to some of NBG’s loan portfolios,
and because we exclude from our calculation of adjusted total equity
(ATE) all hybrid instruments with a 12-month look-back period issued by
banks in the speculative-grade rating category. For NBG, this means that
about 910 million in hybrids are not eligible to be included in our ATE
calculation. Despite the enhancement in 2010, we still believe that
NBG’s solvency does not immunize the bank from what we see as heightened
risks related to Greece’s economic and operating environment.

— MORE

[TOPICS: M$$EC$,M$X$$$,M$$CR$,MT$$$$]

2011-03-31T11:05:14+0000

March 31st, 2011 11:03:51 GMT.

ECB’s Wellink: Boundaries of “very accomodating” monetary policy have been reached, global inflation rising

by

Yada, yada, yada.  Guess the chaps must be meeting somewhere.  I should know, but I don’t.  I wonder if they all go out for a few bevvies afterwards. Or maybe it’s just coincidence they’re clogging up the wires.

  • Rising German inflation shows current interest rates too low for German economy
  • In general, an interest rate rise from 1% would show monetary authorities are alert (it’s the bob martin tablets what does it)
  • Spain’s credibility in financial markets has improved (ummm, let me think about that one)
  • ECB’s policy is designed to prevent restructuring of debt
  • Sees European GDP growth of 1.5% to 2.0% in 2011, 2012

2011-03-31T11:03:51+0000
2011-03-31T10:54:30+0000
2011-03-31T10:48:50+0000
2011-03-31T10:41:41+0000
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