Hedge Fund Bets $22 Billion Against Major European Banks – And it Makes Sense

Bad loans are a real problem for European banks, as the ECB has often stated. According to its own data, non-performing loans (NPLs) amount to close to €1 trillion on the Euro zone banks’ balance sheets, or 6.2% of their total loans, whereas they account for only 1.3% in the United States and 0.9% in the United Kingdom. This cruel comparison should have us worrying. European banks have succeeded in getting the regulatory authorities to not mandate them to account for those bad loans at fair value, meaning in losses to their net value, which would reduce their equity, even though it is recommended in the International Financial Reporting Standards (IFRS). By reinstating those bad loans on their balance sheets (thanks to JP Chevallier) the debt leverage ratio is deteriorating some more. In France, the leverage reaches 23.3 for Crédit Agricole, 29.0 for BPCE-Natixis, 38.3 for BNP Baribas and 38.9 for Société Générale (in other words, 1 euro of equity for 38.9 euro of liabil...

from GoldBroker.com https://www.goldbroker.com/news/hedge-fund-bets-22-billion-against-major-european-banks-and-it-makes-sense-1267