Friday, December 9, 2011

Run on Eurozone banks intensifies

According to a Bloomberg article, the run on the non-German Eurozone banks is intensifying.  Depositors are moving their funds to Germany to pre-empt any exposure to a depreciating currency should the Eurozone fall apart.

Grupo Gowex (GOW), a Spanish provider of Wi-Fi wireless services, is moving funds to Germany because it expects Spain to exit the euro. German machinery maker GEA Group AG is setting maximum amounts held at any one bank. 
“I don’t trust Spain will remain in the euro zone,” said Jenaro Garcia, founder and chief executive officer of Madrid- based Grupo Gowex, which provides Wi-Fi access in 15 countries. “We moved our cash and deposits to Germany because Spain will come back to the peseta.” 
European companies spent billions preparing for the euro when it was introduced in 2000 by 11 countries. Contingency planning for an unraveling of the currency involves cutting investment, moving money to Germany, transferring headquarters to northern Europe from southern, and even going out of business, according to interviews with more than 20 executives. 
The Bundesbank, Germany’s central bank, registered capital inflows of 11.3 billion euros ($15 billion) from non-banks in September, according to the breakdown of its current account published Nov. 9. That helped transform a deficit of 47.3 billion euros in Germany’s balance of other capital flows in August to a surplus of 700 million euros in September....
Top of the list of concerns among companies is the collapse of one or more financial institutions in Europe. Executives say they’re already moving money around to avert that risk.

“We are more careful about investment decisions,” said Juerg Oleas, CEO of GEA, a machinery maker based in Dusseldorf. “We have internally defined maximum amounts that we place with a single bank.”
K+S AG, Europe’s biggest potash supplier, said the company is assessing the counter-party risk of the banks it works with and, should they reach predetermined thresholds, stop the flow of any new funds into that institution. 
“We spread our risk by defining maximum amounts that we allocate to individual bank or issuers of commercial paper and spread our funds broadly among many different parties,” said K+S spokesman Michael Wudonig. 
Juan Jose Nieto, chairman of Service Point Solutions SA (SPS), a Barcelona-based document-management company, said he would move the company’s headquarters to the U.K. or Scandinavia in the event of a euro breakup. 
“We’ve had to reinvent our business in the last few years because of the crisis,” he said in an interview. “We’re in survival mode. What’s happening in Greece and Italy not only affects banks but also companies like us.”

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