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Banks are unwinding derivatives

Colin Henderson

My next target is to try and highlight the derivatives market, and the status.  The size of the derivative market and in particular the infamous Credit Default Swaps represent a gigantic ponzi scheme of artificial liabilities between banks around the world. Quietly banks have been unwinding those contracts, which by the way they could only do if there is no substantive asset behind them.  One dollar of debt can be translated into $3 + of derivatives as if by magic. This from the Financial Times in January that I missed then.  But read on – this is only the beginning … Continue reading Banks are unwinding derivatives

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Lloyds next, and then Barclays

Colin Henderson

I feel for those I know at Lloyds firstly because I know them, and secondly because I used to work for Bank of Scotland (now HBOS, now Lloyds). What is poignant is that Lloyds was the risk averse bank.  This merely validates the point that the banking model is broken when a strong bank can find itself in this sad situation. Also note the reference to Darlings comment that Barclays are next.  Strange days indeed yet I still feel the root cause has not been ferretted out.  I see nothing in Central bank comentary about the derivatives market and the … Continue reading Lloyds next, and then Barclays

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The Economic Outlook for 2009 and Community banks | Yellen SF Fed

Colin Henderson

Economists, even good ones, can sometimes state the obvious and leave a sense that the impossible can actually occur, which of course it will not. The Economic Outlook for 2009 and Community Banks  Delivered February 6, 2009 in Hawaii | Janet Yellen, CEO, Federal Reserve Bank of San Francisco It’s also important to acknowledge that banking organizations find themselves under intense scrutiny and are subject to conflicting pressures. At a time of nearly unparalleled challenges for financial institutions, you find yourselves called on simultaneously to preserve capital, avoid excessive risk, and step up your lending. Policymakers are mindful how difficult … Continue reading The Economic Outlook for 2009 and Community banks | Yellen SF Fed

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Bank nationalisation tracker

Colin Henderson

Just for fun (ok rather perverse fun) I will keep a track of the extent of state ownership of the major banks. Here is the first as of today: RBS                          68%  (could go to 95%) Lloyds                     43% Bank of America   tbd Citi                           tbd (potentially 40%) Wells Fargo           tbd Continue reading Bank nationalisation tracker

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Bank of America are missing an opportunity

Colin Henderson

Why do BofA allow themselves to be behind the politicians on this.  There is so much for relatively little cost that they could be doing to display mea culpa and appear sorry.  Inaction will continue to result in such headlines as this in tomorrows FT and the overall impression that they are “not sorry”. BofA chief to be grilled on bonuses | ft.com Ken Lewis, Bank of America chief executive, will testify on Thursday before New York state prosecutors, who will question him on what he knew about $3.6bn in bonuses paid at Merrill Lynch in December, just before BofA’s … Continue reading Bank of America are missing an opportunity

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Effective state nationalisation of £550bn in bad loans from Lloyds and RBS

Colin Henderson

More later, but the UK government are set to take £550bn in assets out of RBS and Lloyds and place into some form of state facility.  (thats close to $1 trillion btw).  The nationalisation word still remains unsaid. State to insure £300bn of RBS assets | ft.com Royal Bank of Scotland was preparing to inject loans and other credit assets worth more than £300bn into a government-backed insurance scheme on Wednesday night in an effort to stabilise the state-controlled bank while saving it from full nationalisation. Lloyds Banking Group, which is expected to insure up to £250bn worth, is expected … Continue reading Effective state nationalisation of £550bn in bad loans from Lloyds and RBS

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New thinking for Risk Management | Deloitte

Colin Henderson

Risk management has come under the microscope of late, and clearly new thinking is required.  Recently Andrew Haldane of the Bank of England reflected to the weeks and months that it took to work “stress test” models within banks and how that is clearly unacceptable.  He described stress testing as being less “regulatory arbitrage” and more “regulatory camouflage”. (my post summarising Haldane)  (Haldane – BofE pdf) The Deloitte Center for Banking Solutions has a new report out that focusses on providing for an integrated approach across the enterprise. Integrated Compliance and Risk Management Rethinking the approach Unprecedented market turmoil in the industry … Continue reading New thinking for Risk Management | Deloitte

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Is the stock market telling us the obvious | industrial revolution has arrived

Colin Henderson

The economy is all we think about at the moment.  I prefer to see this as a systemic shift in business, with old business disappearing and a better system appearing. A company I have watched since internet appeared in a big way is Amazon.  Quietly they re-invent things, starting with books, moving to other consumer goods, then to virtual storage, virtual servers, and virtual databases.  More recently the Kindle.  This is not a co-oncidence.  There are no Amazon stores. They are a genuine internet company. Anyhow, I plugged into Google Finance with Amazon, eBay, Dow, Borders (just in case it … Continue reading Is the stock market telling us the obvious | industrial revolution has arrived

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Systemic Risk | Was Lehman Brothers too big to exist?

Colin Henderson

Here is a blog concept from Harvard Business that might be interesting to you.  The idea is to focus on summarising new evolving big picture themes for business people. Behind the breaking business news is often a management idea gone right or wrong. That’s where the Conversation Starter comes in. With this blog, we hope to shed new light on major events and trends in the business world by helping unearth the bigger ideas at work and discussing how those ideas are shaping our lives every day. We hope you’ll join the conversation. This one caught my attention.  It speaks … Continue reading Systemic Risk | Was Lehman Brothers too big to exist?