In a financial crisis, people tend to panic (hence the crisis) and want to withdraw their money.   Banks bleed cash.   And if they don’t have enough of it on hand, the bleeding turns into a sucking chest wound.
It’s at this point that they’ve been caught red handed swimming naked, and they need to go raise cash from somewhere, anywhere else.
So they start selling assets– loans, securities, and even shares of the bank itself.

The deputy chair of the Monetary Authority of Singapore (Lim Hng Kiang) said last night at a dinner that “an uneasy calm seems to have settled in markets” and that “we remain in uncharted waters” and informed Singapore banks to increase their capital & liquidity to prepare for financial collapse. 
If a senior official presiding over one of the world’s safer banking jurisdictions wants his banks to increase their capital and liquidity, a rational person would certainly wonder– “What do these guys know about the financial system that I don’t?
They must be expecting the mother of all busts.


By Simon Black, Sovereign Man

Well, at least someone gets it.

While just about every other central bank on the planet is giving everyone two thumbs up on the economy, the deputy chair of the Monetary Authority of Singapore (Lim Hng Kiang) said last night at a dinner that “an uneasy calm seems to have settled in markets” and that “we remain in uncharted waters.”

It was pretty amazing, really, to see such pointed language from a central banking official.

Mr. Lim jabbed at the “obvious” risks and said there would be “bumps on the road” ahead. That’s putting it mildly.

Warren Buffet once said that ‘only when the tide goes out do you discover who’s been swimming naked.’ (In my mind he says it like ‘nekked’ but I seriously doubt he pronounces it that way…)

That’s exactly what happens in severe financial crises. You find out which banks have been playing it safe… and which have so mind-numbingly stupid it’s a miracle they’re still around.

There are a number of ways to judge how safe a bank is. One way is by looking at its liquidity; my preferred metric is to calculate how much cash a bank has on hand as a percentage of customer deposits.

Note- this doesn’t mean physical currency, as in bricks of paper cash stacked up in a vault. Those days went away long ago. I’m talking about electronic currency– typically deposits with central banks.

The more cash a bank has on hand, the safer it is. Because in a financial crisis, people tend to panic (hence the crisis) and want to withdraw their money.

Banks bleed cash. And if they don’t have enough of it on hand, the bleeding turns into a sucking chest wound.

It’s at this point that they’ve been caught red handed swimming naked, and they need to go raise cash from somewhere, anywhere else.

So they start selling assets– loans, securities, and even shares of the bank itself.

 

Limited Edition, Perth Australian 1 oz Silver Saltwater Crocodile
Snap Yours Up Now at SDBullion!

 

 

But this is not an orderly liquidation in a well-functioning market. It’s a distress sale brought on by a full blown crisis. Asset prices are collapsing, fear has taken hold, and it’s difficult to find a buyer.

You never get full price in a crisis (unless you’re Goldman Sachs and can call up your BFF the Treasury Secretary). So in the process of raising cash, banks end up taking heavy losses on their balance sheets.

Now, banks that have healthy balance sheets will be able to withstand these losses.

But banks with razor thin capital ratios (i.e. a bank’s net equity as a percentage of total assets) will fold. Or go to the taxpayer with their hats in their hand claiming to be too big to fail.

This is precisely what happened to the US financial system back in 2009. Lehman Brothers. Wachovia. Washington Mutual. Etc. They were all swimming naked, with very little liquidity and miniscule capital levels.

Singapore’s monetary authority is obviously concerned about financial markets. They understand that you can’t expect to conjure trillions of dollars out of thin air without creating epic bubbles and even more epic consequences.

Sure, you can shuffle those consequences out a few months… even a few years. But at some point those bubbles must be reckoned with.

Perhaps the greatest concern is how few people seem to care.

Central banks and institutional investors turn a deaf ear to obvious risks and fundamentals that are screaming out in desperation hoping some conservative steward will notice that we are tap dancing on a knife’s edge, where nearly every single financial market is simultaneous at/near an all-time high, and central bankers keep pumping money into economies that they claim to be ‘recovered’.

This is the ‘uneasy calm’ that Mr. Lim discussed– a prevailing attitude that there’s nothing to see here; keep calm and buy the all-time high.

And he’s telling banks to get ready for something to happen.

Curiously, Singapore’s banks are already better capitalized and more liquid than most western banking systems. Back in 2008, Singapore demonstrated a lot of resilience as a financial center, sidestepping most of the problems with zero bank failures.

But for a country that went from third world to first world in just a few decades, complacency is not a cultural norm.

According to Mr. Lim, Singapore’s experience with the 2008 crisis “shows how the buildup of risks can severely destabilise even the most developed and sophisticated financial markets.”

So he wants them to increase their capital and liquidity even more.

If a senior official presiding over one of the world’s safer banking jurisdictions wants his banks to become even safer, a rational person would certainly wonder– “What do these guys know about the financial system that I don’t?

They must be expecting the mother of all busts.

 

Certified Morgan & Peace Silver Dollars 
Collect Your Piece of American History Now at SDBullion!

  1. “informed Singapore banks to increase their capital & liquidity to prepare for financial collapse.”
     
    They do things differently over there – have well capitalized banks, announce new banking policy over dinner, etc.  

    • Indeed they do.  It would be very unusual for any bank in Singapore to be badly run.  Those people recognize that banking is, at its very heart, a VERY conservative business that cannot be run successfully in any other way.  
       
      Now, a lot of folks in the West get to feeling their oats about every 20 or so years and jump into the YAHOO! and YEE-HAW! styles of banking, but it never works for more than a very short time.  It may do well at first but it has no real staying power.  When it fails, which it always does, that is when they go to the Gov with hats in hand, begging for a tax-payer supplied miracle.  When that happens, the FDIC should take over the insolvent bank, lock stock and barrel.  Top management should be fired and investigated for criminal behavior and the bank’s assets sold off and / or rolled into a solvent bank, such as was done with Wachovia and Country Wide.  Those who screw the pooch and ruin their banks should not be getting additional chances to do that again.  Ever.  Yet, that is what we see time after time.  Rewarding bad behavior is THE best way there is to get more bad behavior.  It is only when bad behavior is punished that we get less of it.
       

    • Rewarding bad behavior is THE best way there is to get more bad behavior.  It is only when bad behavior is punished that we get less of it. 
       
      I kind of favor the Chinese way of “punishing”. It goes well beyond mere chastisement or wrist-slapping   :D 

    • @undeRGRound
       
      “I kind of favor the Chinese way of “punishing”. It goes well beyond mere chastisement or wrist-slapping   “
       
      It’s not easy for me to side with the Chi-coms on much of anything but, yes, there really ARE people in this world who could benefit from that technique.  In the US, that kind tends to end up running the BIG NY banks and hedge funds. 

    • And only whacking 1 market at a time: silver, gold, or gold miners.  Then like you said, a pretty good bounce.  There are people trying to make their living actually working (not trading) in PM, it feels like a direct assault by the gov.  I imagine the coal industry had it worse.

  2. This is sort of funny
    The US and UK banks passed the Fed sniff test–except for Ally Bank.   Yeah, it’s a Special Olympics test–everyone get a medal
    The DOJ is mining for dollars, negotiating with BN Paribas as to whether they are going to puke up $9 billion or $11 billion.  France is really pissed at this because BNP is the largest French bank.  They’d have to sell an equal amount of stock to replenish their capital base.  
    FACTA, GACTA and FBAR are making our banking system toxic.  There will be capital runs due to these idiotic regulations.
    I don’t know the financial situation of Singapore banks but they are shoring up reserves for a reason. That banking system is probably pretty responsible so if they say they are adding to reserves they know a real crap storm is coming.
    Got deposits?   Buy silver.

    • @AGXIIK
       
      “FACTA, GACTA and FBAR are making our banking system toxic.”
       
      Indeed they are, AG… and many banks around the world are refusing to deal with US citizens because of all the required reporting that these regulations require.  How a regulator in one country has the big brass ones to even think that they have the authority to regulate people in other countries is truly astounding.  The very 1st time this happened, the bank affected should have told those regulators to F*** OFF!  But they didn’t.  Instead, they caved and they have been caving ever since, one idiotic new regulation after another.  There is no end of this BS, you know.  Once the regulators start pumping their s**t, they will do it until either time ends OR they get told to F*** OFF!  So far, though, no joy in the FO department.  Too bad, that.
       
      “There will be capital runs due to these idiotic regulations.”
       
      Yes, there will.  But then, they KNOW this and WILL be implementing capital controls in an effort to block people from moving their money to safer places that appreciate it a lot more than here in the US and even the UK and EU.  It is because of all this BS that so many of us support the idea of getting a good share of our money out of this asinine system before it becomes impossible to get it out.  This is the problem with politicians and regulators.  They truly believe that ALL money belongs to them and not to those of us who actually work for it.  It is merely on loan to us, in their twisted little minds.
       
      “I don’t know the financial situation of Singapore banks but they are shoring up reserves for a reason. That banking system is probably pretty responsible so if they say they are adding to reserves they know a real crap storm is coming.”
       
      That would be my thought as well.  I do not think that the banks in Singapore are in need of raising a lot of capital because of their banking actions.  They know that they are operating in a conservative and responsible manner.  But, they also know that many foreign banks are not operating in this way and that there is at least some inter-connection among all banks these days.  If the western banks get pneumonia, their banks will at least catch a cold if not the flu via their banking associations with the western banks.  Better to be ready for trouble and not need it than to be caught unaware.  I don’t think that much of what happens in the world of banking gets past these fellows.  I would be very comfortable with the idea of using them as the canary in the coal mine insofar as banking problems go.
       
      “Got deposits?”
       
      Some.  I’m working on that.  The thought of being “an unsecured creditor” does not appeal to me in the slightest.  I am from the old school.  It taught that those who deposit money in a bank are THE secured creditors of that bank and their money IS the security.  What the bank does with it after it is deposited is ON THEM and not on me.  As fiduciaries, they are responsible for it and for getting it back to me on demand.  If that is not acceptable to them, then that is not the place to be making any deposits.  If I want this money wagered in the stock casino, I will be doing the wagering and not them.
       
      What the US needs is a “new” type of bank that has a charter that specifically and only allows them to make loans on real estate, such as businesses and homes.  They would accept deposits and those deposits would be backed by a strong portfolio of loans to people and businesses who qualify.  That’s all.  Just solid home-town banking with loans at a reasonable cost, fair interest paid to depositors, and not all this screwing around with other people’s money that seems to be all the rage today.
       
      “Buy silver.”
       
      Indeed… and some gold as well.  :)
       

  3. Over on ZH there is a posst about $80 billion in gold back loans were falsified.  The paper scheme proves that way over 1000 tons of gold was involved. 
    Barclay’s just lost its Dark Pool trading clients
    A top Albanian Banker was murdered at his office
    The CEO and main owner of the largest copper producer in China jumped to his death yesterday
    No bankers arrested Yet.
    Ugly Dog   you are still in the lead with 0-0-0 as your guess.

    • Agree @Bay of Pigs.  That story IS huge and is receiving virtually zero attention from the Main Scream Media hacks.  It isn’t the amount of money involved so much as it is the US$-free nature of the deal itself.  THAT is HUGE.  It very much looks like the beginning of a world-wide trend.  Of course, we have to be buried 40 feet deep in an avalanche before the MSM even lets on that it is snowing.
       

  4. copy that Bay   Gazprom is tasking the US for Syrian plays and this is one big blast against the USD. ISIL and AlCIAda are complete send ups to stop Russia from gaining their own petro hegemony. I am not supportive of either side. Syria is the play and if Putin’s client state holds, the USD is toast. ISIL may be out of control because these mother effers in the MENA are all about smacking the infidels and building that world wide caliphate That is the goal and Putin knows the muslims are a huge threat to him. He and we try to appease them but that’ll do about as much good as telling a pederast to keep his hands off our daughters.
    The power vacuum I see in only slightly larger than the vacuum between the ears of that asshole in the WH.
    He will be the death of us all if he has his way
    Aside from being an incompetent buffoon, he is a nihilist.  

  5. BTW   SCOTUS just told Argentina they cannot negotiate for more time to pay their debts.  Arg will default and here comes the BOOM.  No wonder singapore is puckering up.   Something tells me that the weekend of July 4 will be a doozy is the US D and banking systems take a huge derivative hit.  IMF and Ex Im banks are not going to bail these Arg idiots from their Socialist stupidity.

    • @Silver Alert
       
      Yes, that would be both typical and expected of them.  Virtually all financial announcements come out very late on Friday afternoons. The theory seems to be two fold: 1) get people used to the idea of such announcements occurring at this time; and 2) give them the weekend to chew on the implications once something truly serious occurs.  Things always seem worst at the moment they happen, so maybe this will allow some calm to enter the situation?  Perhaps not but that seems to be the theory.
       

  6. I’m really getting pissed that not one single criminal banker has been arrested.  Hell, I have 3  one ounce silver coins for the best bets on how many.  Its been nearly 1 month.  All we are seeing is dead bankers.  I guess when they say 
    Do not pass GO, do not collect $200 they are still giving Get Out of Jail Free cards  
    There seems to be two speeds with bankers.  
    Alive 
    Dead
    Nothing in between
    If I was a criminal banker I’d be worried about that  Schroedinger’s Bankers Cat hypothetical existence.

  7. My problem with the continual China bashing is its a backhanded way of saying the price of silver will fall. Its seems to me as if there are shills around trying to beat down the price of silver and I ask why? Are there Peeps out there beating down silver when user must buy silver buyers are buying silver for the next period of time? Can see this as playing silver players. 

    • Probably not for a while, Mary.  Lots of cars in this train, so it takes a while for them to build up much speed.  They are very slowly accelerating, though.

Leave a Reply