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2001-2011 Greek Financial Leverage Ratios.

In Debt on May 31, 2011 by CQCA

The chart above shows the leverage ratio of Greece’s central bank and its aggregate figure for all monetary financial institutions. In January, 2001, both the Bank of Greece and Greek MFIs had a leverage ratio between 10 and 15, meaning for every €1 they held in equity or capital, they had €10 to €15 in assets (or €9 to €14 in liabilities).

Monetary financial institutions increased their leverage exposure steadily until a high point of 17.86 in December, 2008. Since that time, they have de-leveraged considerably. The Bank of Greece, by contrast, has leveraged itself higher since that time. The Bank of Greece, by comparison, leveraged itself a high point of 50.03 in December, 2010.

Much of the Bank of Greece’s growth in assets has come from claims on MFIs, which are most likely of dubious market values. If the Bank of Greece’s €130.4 billion in assets go down by 2.46%, it will completely eliminate its capital reserves of €3.2 billion. This will cause Greece’s “lender of last resort” to become insolvent, if it is not already.

Hopefully Germany will throw more of its citizens’ money at Greek banks.

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