ORGANIZED POCKET PICKERS

If anyone still believes that anything isn't possible, they have some surprises ahead.

A front page story today in the WSJ headlines: "U.S. SPYING NABS ALLIES." It's almost a comical read about how paranoid everyone is today among even global official ranks. We know governments spy on their citizens and we know the world is an increasingly unstable place. Spying is an old occupation, perhaps dating back to the one of the world's oldest, prostitution. We also  know that when citizens raise the issue they're labeled fear mongers and paranoids. And that's not new either.

But here's a story about something many people thought would never happened, holding senior debt holders and eventually depositors responsible for bad banking management. It's called bank bail-ins.
zerohedge.com/news/2015-12-30/bail-ins-are-back-portugal-slaps-senior-bank-bondholders-2-billion-loss.

We called this article: "Organized Pocket Pickers," but it was a toss up between that and "Coming to Your Local Bank Soon." As we noted in financialspuds.blogspot.com/2015/12/pocketing-gains, there is little that bankers and bureaucrats won't do to deflect blame and saddle responsibility on the unsuspecting.

Taking the hit will be institutional investors who bought minimum lots of €100,000. 
When BES was bailed out, senior bondholders and depositors were protected while junior debtholders and anyone stuck with the equity were, well, screwed. As was the case with Banif, if Portugal had waited until the new year dawned, uninsured depositors would have been at risk in any attempt to shore up Novo’s books ahead of a plan to restart the auction process. Ultimately, someone had to pay to make this "good" bank turned bad "good" again.
Here's a look at what happened to Novo Banco 2017s in the wake of the announcement:

And for those wondering just which institutional investors are holding those, here's a list (note that Allianz and BlackRock are right at the top):


“This measure was needed to ensure that the losses from Banco Espirito Santo are absorbed firstly by shareholders and creditors and not by the financial system and taxpayers,” the Bank of Portugal said, in a statement. 
Novo Banco initially said the shortfall identified by the ECB last month would be addressed "with a plan that would include selling assets." Here's what The Bank of Portugal said when the stress test was concluded:

As announced by Banco de Portugal on 15 September, the Board of Directors of Novo Banco has already been empowered to present a plan to strengthen its solvency and implement strategic reorganisation. The plan will include measures to address the shortfall within an appropriate time frame. Amongst others, those measures included the following, to be implemented in the short term with the support of Banco de Portugal and Fundo de Resolução:

• Sale of Novo Banco’s shareholding in GNB Vida - Companhia de Seguros, S.A.;
• Sale of other shareholdings which are perceived to be non-core for the bank’s business.

In other words, the idea was to sell "assets" in order to fill the gap on the way to selling the bank itself. Well, someone apparently determined that it would be more efficient to simply force bondholders to fund a capital injection. As WSJ notes, the move represents the first time senior bondholders are on the hook for a banking bailout in the country.
But no one should be worried - well, no one except all of the institutional investors who just got wiped out - because Portugal swears this is the last time capital will have to be injected in Novo Banco. In other words, the sale process will be smooth sailing from here.
Of course the fact that the bank resorted to a bail-in rather than individual asset sales seems to suggest otherwise. As does this:


Keep your eyes soon.peeled. It might just be hour pocket that gets picked. Coming to your local bank soon, believe it or not.