Tag Archives: Société Générale

European Banks Loaded With Greek Debt

BNP, Commerzbank, HSBC, SocGen, Natixis, BNP, CA, AXA, ING and Rabobank all identified as banks with massive Greek repo exposure. The next question is; will writedowns on these now illiquid and  –  as the Greek bond market is effectively shut down for a second day running – untradeable positions be taken?

“Or will Europe follow the U.S. in pretending tens of billions in valuation gaps will be filled by “Hopium?”

Zero Hedge

“As shown by the recent downgrade of Greek banks as a result of sovereign weakness, the potential contagion of sovereign risks to banking systems could spread to other countries such as Portugal, Spain, Italy as well as Ireland and the UK,” Moody’s Investors Service says in a new Special Comment.

Overall, Moody’s notes that each of these countries’ banking systems faces different challenges of different magnitudes, but warns that contagion risk could dilute these differences and impose very real, common threats on all of them.

This Special Comment assesses the contagion risk for those systems where the transmission mechanism primarily stems from the market concerns about the sovereign credit profile, but where, prior to this pressure, the banking systems had been less affected by asset price bubbles or exposure to structured financial products. These are the banking systems of Greece, Portugal, and to some extent Italy. Despite facing a fundamentally different situation compared with Greece, Portugal is now under heightened investor scrutiny, resulting in this week’s review for possible downgrade on the ratings of all Portuguese banks.

A key factor determining whether contagion risk continues in this case will be the market’s view of the likely success or otherwise of the recently agreed IMF and European Union support package for Greece.

Italy is another country where the banking system had been relatively robust so far, but where the major risk to its banking system could also be challenged by contagion risk should the market pressures on the sovereign increase.

The Special Comment then explores those banking systems that have weakened from within, often due to excessive loan growth (mostly Spain and Ireland and to a lesser extent the UK); contagion could potentially also spread to these banking systems where sovereign creditworthiness has been impacted by developments within the banking system.

Moody’s new report, the first of a two-part series, is based on a presentation that Moody’s senior analysts made to investors in various European cities throughout April 2010.

The second and forthcoming part of this series, which will be published shortly, will assess the exposures and capital implications for major European banking systems to the four (most) vulnerable countries, the rating agency writes.

French Toast

According to Bankingnews.gr the French finacial industry is the one with the heaviest exposure to Greek debt.

Banking News writes:

At the time of accepting the Greek toxic bonds repo agreements some banks such as Commerzbank and HSBC had entered into repo with Greek banks from 1.5 to 2 billion each. These banks have sought various ways to get rid of the Greek bonds, but the repo does not break easily.

From foreign banks big exposure to toxic Greek bonds – say toxic as these CDS spread and toxic only be described – are BNP Paribas 5 billion multi-repo in Greek banks.

The Commerzbank 3.1 billion in repo to a large Greek bank.

The HSBC 2 billion in bonds through repo Greek by a Greek major bank.

The Societe Generale 3 billion

The Natixis to 830 million.

The BNP Paribas said it would retain the Greek bonds over the next 2-3 years (5 billion) and borrowings of Greek (3 billion euros)

The Credit Agricole 500 mn euros Zurich Finance 400 mn dollars, AXA 500 mn euros.

The French banks and insurance companies have the greatest exposure to toxic Greek bonds.

Positive support of the Greek debt and Dutch banks hold funds with 12 billion. The Greek bond ING holds 3 billion and Rabobank 300 million.

I guess there’s more to come…


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2010 Analysis: Four Scenarios

I have managed to collect some analysis, predictions and commentaries from some of the worlds leading financial firms and experts, In the days to come I will present them here at econotwist.worldpress.com. Hopefully you will find them usefull and intersting. To kick off the ball; here’s the team of analysts at Europe‘s biggest bank, Deutsche Bank, who predicts four posible scenarios for 2010.

“One of the largest challenges will be funding the still large global government insurance in a world with less quantitative easing. QE limited the discussion of the impact of crowding out in 2009. Will we be as fortunate in 2010?”

Deutsche Bank

(Aricle in Norwegian, original report in English)

Jeg har samlet noen analyser, prognoser og kommentarer om den globale økonomiske utviklingen fra noen av verdens ledeende finansforetak og eksperter.  I dagene fremover vil jeg presentere den en etter en her på econotwist.worldpress.com. Først ut er analyseteamet til Deutsche Bank. Den europeiske storbanken skisserer fire mulige scenarioer for 2010.

– Selv om vi er positive på kort sikt, er det klart når vi ser på verden i dag at det nåværende makromiljøet vil være vanskelig å beholde. I 2010 vil markedet trenge tydelige beviser på at landene som har stått for de mest aggressive mottiltakene under finanskrisen er på stø kurs tilbake til finansiell disiplin. Hvis ikke vil vi fortsette å bygge opp risikoen for statlige gjeldsbomber som kan forstyrre bedringen i det svake næringslivet, skriver Deutsche Bank.

– Og skulle 2010 bli et nytt vanskelig år, er det lite sansynlig at katalysatoren vil komme fra aksjemarkedet eller det kommersielle kredittmarkedet. Det betyr at de makroøkonomiske forholdene vil styre økonomien i 2010, og i realiteten vil dem som har investert i statsobligasjoner rundt om i verden være dem som avgjør skjebnen til andre mer risikofylte investeringsklasser, konkluderer analytikerne.

Deutsche Bank skissere fire mulige scenarioer for den økonomiske utviklingen neste år.

1.(mest optimistisk) “This scenario is one where the authorities have as good a year as they did in 2009. They likely keep stimulus extremely high in the system without there being any noticeable consequences of their actions. Under this scenario we would expect equities to be significantly higher, credit spreads be much tighter but with bond yields only edging slightly higher as the authorities are seen to have firm control of inflation expectations and may even be continuing to buy bonds.”

2.(mest sansynlig) “This scenario is the most likely and suggests that we start to see gradual easing off the gas from the authorities but only as it’s proved that there is some momentum in the underlying economy. Under this scenario risk assets have a good year but returns are checked to some degree by rising bond yields and less stimulus being injected into markets. A satisfactory year for risk, especially equities, but a mildly negative one for fixed income. Credit investors will likely have to rely on spreads to get positive total returns.”

3.(mindre sansynlig) “This is the second most likely scenario overall in 2010 but one that potentially becomes more likely as the year progresses. Here we are likely to see sharply higher bond yields start to disrupt the positive momentum in markets. These higher yields could be either due to Government supply starting to overwhelm demand, or because of inflation fears. It seems unlikely that actual inflation will be a concern in 2010 but it’s quite possible for expectations to become unanchored. We would also have to include the potential for a Sovereign crisis somewhere in the Developed world within this scenario. We would note that the higher yields in this scenario are not based on positive growth momentum but by inflation/Sovereign risk.”

4. (skrekk-scenarioet) “This is the nightmare scenario of Deflation or in less extreme terms perhaps a double-dip. Given that much of the world is currently still in negative YoY inflation territory it is difficult to completely rule out even if we do live in a fiat currency system and even if inflation is expected to return to positive territory in early 2010. For deflation to be sustained we would probably need an exogenous event to hamper the authorities ability to continue to successfully fight this credit crisis. Such events could be a fresh banking crisis arising, a political backlash encouraging immediate increases in economic regulation or withdrawal of stimulus, or possibly a Government bond/currency sell-off that forces the authorities to aggressively reign in stimulus for fear of a sovereign  risis.”

Den europeiske iTraxx-indeksen som måler prisen på europeiske Credit-default Swaps:

Prisen for å forsikre statlig gjeld (Credit-default Swaps) er på vei opp igjen.

Her er hele analysen fra Deutsche Bank.

Tidligere analyser:


Danske Bank

Et bilde sier mer enn tusen ord.

Blant de andre observasjonene er blant annet:

* Gull (som nå koster rundt 1200 dollar per unse) har ikke vært billigere siden begynnelsen på 70-tallet.

* Obligasjoner er en klart bedre investering enn aksjer.

* Negativ utlånsvekst i USA.

* Boliglånsrentene vil ligge på rekordlave nivåer til forbi 2015.

* Kjerneinflasjonen i flere land vil falle mot 0%.

Når det gjelder valg av strategi for året som kommer, siterer Edwards  styreformannen i det kinesiske statlige investeringsfondet,  (China Investment Corp), Lou Jiwei:

“It will not be too bad this year. Both China and America are addressing bubbles by creating more bubbles and we’re just taking advantage of that. So we can’t lose,”

Her er hele analysen fra Société Générale Cross Asset Reasearch:

Tidligere analyser:


Danske Bank

Deutsche Bank

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"An Embarrassing Report"

Friday’s report from SIGTARP must be quite embarrassing for the U.S. Authorities, as well as for the nations financial industry. It reveals a complete lack of knowledge about the financial markets among the regulators and a complete lack of respect among the Wall Street bankers. The Special Inspector General, Neil Barofsky, says in the report that NY FED-chief failed to negotiate a proper deal with AIG’s counterparts in the derivative trades, and by doing so he opend a “backdoor bailout” for several international banks.


“The lesson that should be learned – one that has been made apparent time after time in the government’s response to the financial crisis – is that the default position, wherever government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with the government’s funds.”

Neil Barofsky

(Article in Norwegian, links to sources in English)


Resultatet av kanksje årets viktigste undersøkelse i USA ligger nå på bordet. Rapporten fra SIGTARP dokumenterer at FED New York i fjor ødela forhandlingene om nedskrivninger med AIGs motparter i derivathandelen, og gjorde AIG til en “backdoor bailout” for en rekke globale storbanker.




Det politiske presset mot USAs finansminister Timothy Geithner og sentralbanken Federal Reserve øker for hver dag som går.

Før helgen publiserte SIGTARP sin hittil sjette spesialrapport om bruken av krisepakken på 700 milliarder dollar til bankene.

SIGTARP (The Office of the Special Inspector General for the Troubled Asset Relief Program) ble opprettet i forbindelse med innføringen avThe Emergency Economic Stabilization Act of 2008, EESA, i november 2008.

SIGTARP har som oppgave å føre tilsyn med hvordan pengene i krisepakken blir brukt, i tillegg til å beskytte skattebetalernes interesser.

8.desember ble Neil M. Barofsky utnevnt som spesialinspektør for programmet.

Siden opprettelsen har Barofsky levert fire kvartalsrapporter pluss seks spesialrapporter.

Den siste spesialrapporten ble offentliggjort fredag og omhandler den dramatiske situasjonen rundt forsikringsgiganten AIG i november i fjor.

Her er en elektronisk kopi av rapporten.


– Geithner feilet

Neil Barofsky mener Timothy Geithner – som på dette tidspunkt var sjef for New York FED – feilet i forhandlingene med AIGs motparter i derivathandelen om eventuelle nedskrivninger.

Geithner og NY FED besluttet å behandle alle AIGs motparter likt, noe som effektivt utelukket ytterligere nedskrivninger i en rekke globale storbanker som UBS, Société Générale, Calyon og Goldman Sachs.

– FED skulle gitt forskjellige tilbud til de forskjellige bankene, skriver Barofsky.

– Spesielt ettersom mange allerede hadde mottatt milliarder av dollar i krisehjelp fra den amerikanske regjeringen, og de burde brukt sin tyngde som overordnet myndighet til å få bankene med på en nedskrivningsordning.

– I stedet endte FED opp med en forhandlingsstrategi med motpartene som til og med NY FEDs president, Timothy Geithner, har innrømmet hadde små muligheter for å lykkes, skriver TARP-inspektøren.


Et “kyllingspill”

Neil Barofsky beskriver telefonforhandlingene med AIGs motparter som et “kyllingspill“.

For eksempel opplyste Goldman Sachs ( som har mottatt til sammen 14 milliarder i krisehjelp) at de ikke banken ikke ville bli skadelidende om AIG ble slått konkurs fordi de hadde sikret (hedget) sin eksponering mot kredittderivatene fra AIG.

Dermed var det ingen grunn til at Goldman Sachs skulle gå med på å ettergi noen av pengene de hadde til gode hos AIG.

Av de ni storbankene som var motpart i AIGs handel med CDO-er (Collateralized Debt Obligation) var det bare UBS som sa de var villig til å ettergi 2 prosent – men bare om de andre gjorde det samme.


Løy om risiko

16.september i fjor – samtidig som myndighetene forberedte en ny krisepakke på 85 milliarder dolllar – uttaler Goldman Sachs sin finansdirektør David Viniar at AIG-saken, uansett utfall, vil ha en “immaterial” effekt på bankens resultat.

Verdien på Goldmans portefølje av CDO-er (opprinnelig 22,1 milliarder dollar) var da redusert med 10 milliarder. I tillegg hadde banken ytterligere 2,5 milliarder dollar utestående hos forsikringsselskapet.

SIGTARP-rapporten viser at verdien på de undeliggende instrumentene i derivatporteføljen fortsatte å falle i de neste månedene og at dersom AIG hadde kollapset ville Goldman Sachs vært nødt til å realisere et kjempetap.

Den kjente derivateksperten Janet Tavakoli har tidligere hevdet at David Viniar snakket mot bedre viten da han uttalte seg 16.januar 2008.

En påstand hun senere måtte be om unnskyldning for, på grunn av manglende dokumentasjon og påtrykk fra bankgigantens advokater.

Søndag ettermiddag har Tavakoli sendt ut et brev der hun trekker tilbake sin unnskyldning.


Trekker unnskyldning

I kommentaren som er lagt ut på Tavakoli Structural Financesin hjemmeside i ettermiddag skriver den anerkjente finanseksperten:


“I Retract My Apology and Call for More Regulation of Goldman Sachs.”

Med henvisning til SIGTARP-rapporten understreker hun blant annet:

• “From July 2007, AIG’s financial situation deteriorated while so-called “AAA” collateralized debt obligations (CDOs) dropped in value. AIG sold credit default swaps (CDSs) on these CDOs and had to post more collateral, as the prices plummeted.”

• “Goldman Sachs was AIGFP‘s (UK-based AIG Financial Products) largest CDS counterparty with around $22.1 billion, or about one-third of the problematic trades. Goldman underwrote some of the CDOs underlying its own CDSs, and also underwrote a large portion of the CDOs against which French banks SocGen, Calyon, Bank of Montreal, and Wachovia bought CDS protection. Goldman provided pricing on these CDOs to SocGen and Calyon. Goldman was a key contributor to AIG’s liquidity strain and the resulting systemic risk.”



Her er den siste kommentaren fra Janet Tavakoli.

(Dokumentet inneholder lenker til tidligere kommentarer, analyser og andre opplysninger i saken)



Rolle-røre og hemmelighold

SIGTARP konkluderer med at det først og fremst er AIGs handelspartnere som har hatt mest nytte av krisepakkene til selskapet.

Amerikanske skattebetalere har fremdeles 180 milliarder dollar i forpliktelser og garantier overfor AIG.

Neil Barofsky:

* “Goldman Sachs and the other counterparties also benefited from a calculation that the Fed would certainly not permit an AIG default in any case. The Fed, for its part, was unwilling even to hint that AIG would be permitted to default, for fear of the consequences this suggestion would have on the market in general,” tilføyer Barofsky som også mener det var en tabbe av FED å ikke umiddelbart offentliggjøre navnene på bankene som var AIGs motparter, med begrunnelse om at det kunne underminere den finansielle stabiliteten.

* “The government’s argument simply does not withstand scrutiny. The lesson that should be learned – one that has been made apparent time after time in the government’s response to the financial crisis – is that the default position, wherever government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with the government’s funds.”


I oktober leverte SIGTARP en spesialrapport om forholdet mellom New York Federal Reserve og AIG. Ifølge byrået har FED ikke sett betydningen av oversikt og kontroll med bonusordningene i selskapet. Også Finansdepartementet blir kritisert for det samme.

Janet Tavakoli skriver i sin kommentar:

“Treasury Secretary Timothy Geithner, then President of FRBNY, is revealed in this New York Times article with apparent Stockholm syndrome rivaled only by Patty Hearst. He seems to echoGoldman’s talking points after discussions with Goldman’s CFO. In the fall of 2008, Henry (“Hank”) Paulson was Treasury Secretary. Paulson was formerly CEO of Goldman Sachs and held that role when Goldman executed its trades with AIG. Stephen Friedman, a former Goldman Sachs co-chairman, was Chairman of FRBNY. Friedman owned shares of Goldman Sachs, and was a member of Goldman’s board, while he held his influential Fed position. He resigned the Fed position in May 2009, but not before purchasing 50,000 shares of Goldman Sachs, when the public was still in the dark about the terms of the bailout.”


– I lys av SIGTARP-rapporten trekker jeg tilbake min tidligere unnskyldning til Goldman Sachs. De offentlige forpliktelsene overfor AIG ligger nå på rundt 182 milliarder dollar. Hvis du lurer på hva Goldman-sjefen Lloyd Blankfein mente da han sa at Goldman Sachs har deltatt i ting som åpenbart var galt, og som de har grunn til å angre på og be om unnskyldning for, så tenk på Goldmans rolle i AIG-krisen, banken egen krisehjelp og den nåværende kraftige subsidieringen med skattebetalernes penger. På den måten vil i hvert fall en av dere bli virkelig lei seg, avslutter Janet Tavakoli.



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