07 octubre 2016


Desde la crisis, los bancos no se prestan en el interbancario entre ellos. No se fían de que al día siguiente se lo va a devolver el otro. Triangulan con el Banco Central Europeo que actúa de intermediario para evitar esos recelos. Pero esto se les está yendo de las manos… Como sigan así van a conseguir que el sistema bancario haga chin pun, y se vaya a la mierda… Es demasiado dinero, hay muchos bancos españoles e italianos que le deben demasiado a los bancos alemanes… Y mientras tanto, todos miran hacia otro lado, pensando que la patada adelante de los bancos centrales, para ganar tiempo, es suficiente… Lo dudo.
2.700 billones de euros por minuto… Es el flujo de movimientos entre los bancos europeos… ¿Quién se queda con la patata caliente? ¿Quién se va a quemar?

Inside the Pipeline That Transfers 2.7 Billion Euros a Minute

With an average volume of 2.7 billion euros ($3 billion) a minute over the course of each business day, the euro area's TARGET2 settlement system is one of the world's most important bits of financial plumbing.
Like most bits of plumbing it is generally out of sight and — except for extreme monetary fetishists — out of mind. This does not mean, however, that people should dismiss TARGET2 as nothing more than a piece of infrastructure, as it throws up insights into stresses within the euro system.

So what is it, exactly?

TARGET2 is a payments system for banks. If a bank needs to move money to another bank, it electronically transfers the funds using TARGET2. The transaction is very simple. 
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Every bank in the euro area has an account with its own national central bank. If an Irish bank, for example, wants to move money to a German bank, it informs the Irish central bank of its transaction. The Central Bank of Ireland contacts the Bundesbank, where the German destination bank has an account, and the transaction is completed. The Central Bank of Ireland debits the Irish bank's account, and the Bundesbank credits the German bank's account. 
All very simple really. And very quick too, with 99.9 percent of all transactions completed within five minutes. Basically, TARGET2 is just a phone line. 

So, why am I still reading this?

Well, things get interesting when the European Central Bank adds new money into the mix.
Let's return to our example of a transaction between an Irish and a German bank. Also, let's set the calendar to some time in mid 2009.
The Irish bank had borrowed €100 million over three years from a German bank back in 2006, when Irish banks seemed like a good bet. By mid-2009, things were looking different and the Irish bank had a €100 million bill coming due, with nobody in the market willing to lend to it.
Luckily, the European Central Bank had recently moved to full-allocation liquidity operations,1  so the Irish bank is able to borrow the money from the Irish central bank, and the payment gets made.
However, when we look at the transaction through the prism of TARGET2, something odd has occurred.
The money that was credited into the Irish bank's account to allow it to pay the German bank did not come from anywhere. It just kind of appeared into the system. 
This money started appearing across the periphery of the euro area as the crisis continued leading to imbalances in the TARGET2 system, like a credit created without a matching debit. It is important to note that the transnational imbalances only existed as the funding crisis was concentrated in particular countries. 
As the bank funding crisis eased in the aftermath of ECB president Mario Draghi's famous "whatever it takes" speech, peripheral banks' reliance on central-bank liquidity started to lessen. As banks repay this money to their national central bank, the imbalance is extinguished.

Why should I care about this today?

As you can see from the chart above, TARGET2 balances have started increasing again. This, again, is due to the ECB creating money and adding it to the banking system in the middle of a normal TARGET2 transaction, but at a slightly different point — and in a more direct way.
In the run up to mid-2012, peripheral central banks were lending to banks in their own countries and those banks were then using that money to repay debts to banks in the core. 
Since the ECB started its asset-purchase program in early 2015 national central banks are once again creating money, but this time they are not crediting banks' own accounts, they are crediting the bank accounts of the holders of the bonds they are purchasing. 
This time, it is where those bank accounts are located that is causing the imbalance.
As Peter Praet, chief economist of the European Central Bank, explained in a speech last week, most of the accounts of those asset holders are in Germany. So, if the Bank of Spain, for example, wishes to purchase some Spanish debt in the market the seller is likely to hold an account in Germany. To TARGET2, the transaction looks like this. 
As the money is created at the Bank of Spain and then moved to the Bundesbank, the liability does not arise in Germany, but rather in Spain. 
In the run up to the 2012 crisis, TARGET2 balances were useful in giving an indication of where reliance on ECB liquidity was highest. Since the ECB's Asset Purchase Program began, all they are telling us is where bondholders prefer to bank. 
But at least you now know how the whole thing works. 
Finally, the ECB could get rid of much of the TARGET2 confusion by removing the national central banks from the system and put itself alone in the center of all transactions — having every bank in the euro area hold their accounts with it, rather than their national bank — but that may be a reform too far for now. 
PD1: Estos son los últimos datos del Target2, lo que tienen prestado los bancos acreedores y lo que deben los bancos deudores:
Y aquí los últimos datos publicados: sigue la salida de dinero de España e Italia…, hacia Alemania.
The ECB statistical data warehouse released Target2 Balance figures today.
The numbers are reflective of intensifying capital flight in Italy and Spain.
The above charts shows most of the major countries, not all of them.
Italy's target2 hit a record low -€326.9 billion in July. This is a 6th consecutive monthly record for Italy, minimum, possibly dating back to 2nd quarter of 2015.
Spain's target2 deficit hit -€313.6 billion. In 2012 Spain hit -€337.3 billion.
Target2 Discussion
No discussion of eurozone problems would be complete without a discussion of Target2, an abomination created by the eurozone founders and one of the fundamental flaws of the euro.
Target2 stands for Trans-European Automated Real-time Gross Settlement System. It is a reflection of capital flight from the "Club-Med" countries in Southern Europe (Greece, Spain, and Italy) to banks in Northern Europe.
Pater Tenebrarum at the Acting Man blog provides this easy to understand example: "Spain imports German goods, but no Spanish goods or capital have been acquired by any private party in Germany in return. The only thing that has been 'acquired' is an IOU issued by the Spanish commercial bank to the Bank of Spain in return for funding the payment."
This is not the same as an auto loan from a dealer or a bank. In the case of Target2, central banks are guaranteeing the IOU.
Target2 also encompasses people yanking deposits from a bank in their county and parking them in a bank in another country. Greece is a nice example, and the result was capital controls.
If Italy or Greece (any county) were to leave the Eurozone and default on the target2 balance, the rest of the countries would have to make up the default according to their percentage weight in the Eurozone.
PD2: Últimamente me han entrado dudas de lo que cuento aquí sea cierto, siga fielmente el Evangelio del Señor en materia de amor y misericordia. ¿No me estaré despistando y cometiendo herejías aquí y allá? ¿No estaré contando demasiado cosas de mi vida, lo que me pasa y pienso, mis opiniones personales? Si digo alguna barbaridad te invito a que me corrijas; si digo alguna herejía, te urjo a que me avises cuanto antes… Creo que debo trasmitir las enseñanzas del Evangelio de Cristo, no, como viene siendo habitual en la sociedad, la religión particular a la carta y gusto de cada uno…