Here's How To Tell If Cyprus Is Causing A Problem To The European Banking System

Jim D. Woodward / FlickrThe decline in European stocks and the euro today, post-Cyprus, is an obvious outward sign of nervousness.

But we'll know more in the coming days about whether "contagion" channels have been re-opened and whether concerns about Cypriot banks spread to other peripheral nations in any manner.

Lorcan Roche Kelly, an analyst at Trend Macrolytics, has a note out arguing that a wider panic is unlikely, but that we'll be able to tell more in the days ahead.

He writes:

• The precedent aside, there is little risk of a bank run in otherperipheral euro area nations. Cyprus is viewed as being sufficientlyunique by other peripheral depositors -- the Russian mobster money-laundry service story is well known in Europe -- to allow this to pass without too much immediate contagion risk.
• Even if there is such a risk, Jörg Asmussen -- a Germanrepresentative on the ECB's Governing Council, who had a leading role in negotiations of the deal -- said that the ECB stands ready to provide support to any euro area banks through normal monetary operations and national central bank ELA.
• We can easily monitor if either of these promises by Asmussen arecalled upon by European banks. There is a normal liquidity operation due to be allocated on Tuesday, with all operations so far this year in a tight range from €124 billion to €132. The overnight liquidity Marginal Lending Facility operations will also be an early indicator of stress.
• If ELA is called on in any major way, we will see it in the weekly ECB financial statement. Unfortunately, any moves this week will not be reflected until the following Tuesday.

For more real-time analysis, follow Lorcan on Twitter.