http://harveyorgan.blogspot.com/2012/04/spanish-non-performing-loans-up-to.html
On February 27 the European Union agreed more sanctions including prohibiting trade in gold and other precious metals with Syrian state institutions, including the central bank.
AS SANCTIONS BITE, SYRIA SAID TO BE SELLING GOLD RESERVES AT 15% DISCOUNT
Syria Selling Gold Reserves as Sanctions Bite: Sources
By John Irish and Amena Bakr
Reuters
Wednesday, April 18, 2012
http://www.reuters.com/article/2012/04/18/us-syria-gold-idUSBRE83H0RZ201...
Syria is trying to sell gold reserves to raise revenue as Western and Arab sanctions targeting its central bank and oil exports begin to bite, diplomats and traders said.
Western sanctions have halved Syria's foreign exchange reserves from about $17 billion, French Foreign Minister Alain Juppe said on Tuesday after a meeting with about 60 nations aimed at coordinating measures against President Bashar al-Assad's government.
"Syria is selling its gold at rock-bottom prices," said a Western diplomatic source, declining to say where it was being sold.
A second diplomatic source confirmed the information, adding that Damascus was looking to offload everything it could to raise cash, including currency reserves.
By John Irish and Amena Bakr
Reuters
Wednesday, April 18, 2012
http://www.reuters.com/article/2012/04/18/us-syria-gold-idUSBRE83H0RZ201...
Syria is trying to sell gold reserves to raise revenue as Western and Arab sanctions targeting its central bank and oil exports begin to bite, diplomats and traders said.
Western sanctions have halved Syria's foreign exchange reserves from about $17 billion, French Foreign Minister Alain Juppe said on Tuesday after a meeting with about 60 nations aimed at coordinating measures against President Bashar al-Assad's government.
"Syria is selling its gold at rock-bottom prices," said a Western diplomatic source, declining to say where it was being sold.
A second diplomatic source confirmed the information, adding that Damascus was looking to offload everything it could to raise cash, including currency reserves.
On February 27 the European Union agreed more sanctions including prohibiting trade in gold and other precious metals with Syrian state institutions, including the central bank.
Two gold traders in the United Arab Emirates said the Syrian government had been offering gold at a discount, with one saying it was making offers at about 15 percent below the market price.
The trader said Damascus was selling small volumes of around 20-30 kilos, which were easier to offload, with offers being made through private accounts set up with free email providers.
Another trader said deals as of yet had not gone through in Dubai because the Emirati authorities were blocking unauthorized trades and few potential buyers were willing to take the risk of these deals.
"We have been getting offers for gold purchases from Syria and North African countries at 15 percent discount, but there are tough restrictions in Dubai that don't allow any unauthorized trades," said the trader.
The meeting on Tuesday was aimed in part at tightening up existing sanctions and trying to pinpoint countries that were offering Damascus ways to sidestep them.
The World Gold Council estimates that Syria had about 25.8 metric tones of gold as of February 2012, representing about 7.1 percent of its total reserves.
At Wednesday's spot prices, Syria's total gold reserves are worth around $1.36 billion. Around $33.8 billion worth of gold is cleared through London on a daily basis.
Syria has not published economic statistics since May 2011, making it impossible to verify gold figures or forex reserves.
Spot gold inched up 0.2 percent to $1,652.84 per ounce on Wednesday, after touching a one-week low near $1,634 in the previous session.
Diplomatic sources estimated the sanctions had cut Syria's oil output by 30 percent, costing Assad's government $400 million a month in revenue, or $2 billion since November. Prior to EU sanctions, Damascus sold 90 percent of its oil to Europe.
The Syrian pound hit a record low on the black market in March of around 100 to the dollar, compared to 47 before the protests erupted, sharply raising the cost of imports.
Diplomats said that sort of economic difficulty would over time increase the pressure on Assad's government.
"Sanctions are a particularly effective instrument to deprive the Syrian regime of the resources it uses to finance and arm militias," Juppe said on Tuesday.
* * *
* * *
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end
These are a must see: (KingWorldNews/GATA)
first: Von Greyerz
Bank failures, financial panic likely, von Greyerz tells King World News
Submitted by cpowell on Wed, 2012-04-18 18:36. Section: Daily Dispatches
2:30p ET Wednesday, April 18, 2012
Dear Friend of GATA and Gold (and Silver):
Gold fund manager Egon von Greyerz says the worsening debt and leverage problems in Europe promise bank failures and even financial panic, making more massive money creation inevitable. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
end
second, my favourite: Nigel Farage
Euro zone breakup now a real possibility, Farage tells King World News
Submitted by cpowell on Wed, 2012-04-18 20:25. Section: Daily Dispatches
4:20p ET Wednesday, April 18, 2012
Dear Friend of GATA and Gold:
Interviewed today by King World News, former commodities broker Nigel Farage, leader of the United Kingdom Independence Party and a most troublesome member of the European Parliament, says the dissolution of the euro zone is suddenly a topic of legitimate discussion and a real possibility even as there's no plan for managing it. Farage says markets may just overwhelm the whole international central banking system. (Let's hope.) An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
Early this morning, Goldcore provided an update on gold and silver trading in Europe.
Of particular significance is the Indian government debasing its currency, the rupee, as it cut interest rates there by 1/2 of a percentage point despite the fact that inflation is ravaging that country. Inflation in March came it at 9.47% year over year. As I pointed out to you yesterday we are now at the beginning of the wedding season in India where demand rises as the men adorn their women with gold. With real interest rates now negative, the smart Indians will load the boat with gold as they see their country in turmoil due to the ravages of inflation.
The most important commentary came from the IMF itself which sees a collapse of the Eurozone and a full blown financial panic. It warned that an exit of just one member could have "untold knock on effects".
It also stated that risk adverse central banks are now favouring gold over the Euro for official reserves:
(courtesy Goldcore)
Cross Currency Table – (Bloomberg)
Gold fell $1.50 or 0.09% in New York and closed relatively unchanged at $1,650.20/oz yesterday. Gold traded sideways prior to gradually creeping up in late Asian trading. It then gave up those gains in European trading and is nearly unchanged from yesterday’s close in New York.
Gold 1 Year Chart – (Bloomberg)
Of particular significance is the Indian government debasing its currency, the rupee, as it cut interest rates there by 1/2 of a percentage point despite the fact that inflation is ravaging that country. Inflation in March came it at 9.47% year over year. As I pointed out to you yesterday we are now at the beginning of the wedding season in India where demand rises as the men adorn their women with gold. With real interest rates now negative, the smart Indians will load the boat with gold as they see their country in turmoil due to the ravages of inflation.
The most important commentary came from the IMF itself which sees a collapse of the Eurozone and a full blown financial panic. It warned that an exit of just one member could have "untold knock on effects".
It also stated that risk adverse central banks are now favouring gold over the Euro for official reserves:
(courtesy Goldcore)
From GoldCore
Central Banks Favour Gold as IMF Warns of “Collapse of Euro” and “Full Blown Panic in Financial Markets”
Gold’s London AM fix this morning was USD 1,646.50, EUR 1,258.41, and GBP 1,030.80 per ounce. Friday's AM fix was USD 1,652.00, EUR 1,255.51 and GBP 1,035.54 per ounce.
Silver is trading at $31.61/oz, €24.16/oz and £19.78/oz. Platinum is trading at $1,577.25/oz, palladium at $656.90/oz and rhodium at $1,350/oz.
Cross Currency Table – (Bloomberg)Gold fell $1.50 or 0.09% in New York and closed relatively unchanged at $1,650.20/oz yesterday. Gold traded sideways prior to gradually creeping up in late Asian trading. It then gave up those gains in European trading and is nearly unchanged from yesterday’s close in New York.
Gold remained relatively unchanged from yesterday as Spain’s debt auction eased some worries about the eurozone debt crisis. Although this is another temporary respite as the euro may remain under pressure ahead of Madrid’s long term debt sale later this week.
Investors appear more focused on Europe even though US industrial output numbers and housing starts were low. A surprise jump in German business sentiment lifted riskier assets including equities.
Gold 1 Year Chart – (Bloomberg)India’s central bank is further debasing the Indian rupee which will lead to further safe haven demand for gold, and is still the world’s largest buyer of gold.
India has had its first rate cut in 3 years and was cut by a higher than expected 50 basis points to 8%.
This comes despite inflation being higher in March compared to last month surging to 9.47%.
The recent tax increase on gold was a futile attempt to curtail gold demand – as Indian policy makers realised accelerating inflation would lead to further gold demand.
Wedding season is at its peak in India now and Akshaya Tritiya, a large gold buying festival, happens later this month. There are forecasts of a 25% increase in demand during the Hindu festival next week after demand was curtailed during the gold jewellers strike (see Other News below).
Deepening negative real interest rates in India and the risk of an inflation spiral will see Indian demand remain robust and it may even accelerate if inflation deepens - contrary to suggestions that Indian gold demand will fall precipitously.
IMF: Risk of Collapse of Euro and “Full Blown Panic in Financial Markets”The Eurozone could break up and trigger a “full-blown panic in financial markets and depositor flight” and a global economic slump to rival the Great Depression, the IMF warned yesterday.
In its World Economic Outlook report, the International Monetary Fund said the collapse of the crisis-torn single currency could not be ruled out.
It warned that a disorderly exit of one member country would have untold knock-on effects.
"The potential consequences of a disorderly default and exit by a euro area member are unpredictable... If such an event occurs, it is possible that other euro area economies perceived to have similar risk characteristics would come under severe pressure as well, with full-blown panic in financial markets and depositor flight from several banking systems," said the report.
"Under these circumstances, a break-up of the euro area could not be ruled out."
“This could cause major political shocks that could aggravate economic stress to levels well above those after the Lehman collapse," said the report.
Risk Averse Central Banks Favour Gold Over EuroThe risks outlined by the IMF are real and are being taken seriously by central banks who are becoming more favourable towards diversifying foreign exchange reserves into gold.
Central bank reserve managers responsible for trillions of dollars of investments are shunning euro assets and questioning the currency’s haven status because of the region’s sovereign debt crisis, research has found, according to the FT.
Among the most conservative of investors, central bankers have tended to keep much of their fx reserves in high quality euro and dollar denominated assets, such as government bonds.
However, a survey of reserve managers at 54 central banks responsible for portfolios worth $6 trillion, almost half the world’s total, signals that the sovereign debt crisis has sparked a reversal of that trend.
More than three-quarters said the sovereign debt crisis has had a profound impact on their reserve management strategy, with their central banks pulling back from eurozone counterparties and reconsidering attitudes toward the single currency.
Signifying the mood of caution among the world’s central bankers, 71% of those polled said gold was a more attractive investment than it had been at the start of last year. Central banks made their largest purchases of gold in more than four decades last year and have continued to buy the precious metal in the early months of 2012.
Central bank demand is set to continue and may accelerate as the global debt crisis deepens in the coming months.
Spanish Banks Gorging on Sovereign Bonds
Spanish, Italian and Portuguese banks are loading up on bonds issued by their own governments, a move that shifts more of the risk of sovereign default to European taxpayers from private creditors.
Holdings of Spanish government debt by lenders based in the country jumped 26 percent in two months, to 220 billion euros ($289 billion) at the end of January, data from Spain’s treasuryshow. Italian banks increased ownership of their nation’s sovereign bonds by 31 percent to 267 billion euros in the three months ended in February, according to Bank of Italy data.
German and French banks, meanwhile, have cut holdings of those countries’ bonds, as well as Irish and Greek debt, by as much as 50 percent since 2010 in some cases. That leaves domestic firms on the hook for a restructuring such asGreece’s last month and their main financier, the European Central Bank, facing losses. Like Greece, governments would have to rescue their lenders with funds borrowed from the European Union.
“The more banks stop cross-border lending, the more the ECB steps in to do the financing,” said Guntram Wolff, deputy director of Bruegel, a Brussels-based research institute. “So the exposure of the core countries to the periphery is shifting from the private to the public sector.”
ECB LENDING
The jump in sovereign-debt holdings by Spanish and Italian banks has been fueled by the ECB’s 1 trillion-euro long-term refinancing operation, or LTRO, initiated in December, to provide liquidity to the region’s lenders. Encouraged by their governments to take the money and buy bonds, banks borrowed 489 billion euros on Dec. 21 and 530 billion euros on Feb. 29.
For lenders in so-called peripheral countries -- Spain, Portugal, Ireland, Greece and Italy -- profit also was an inducement: They could borrow at 1 percent to buy government bonds yielding between 6 percent and 13 percent.
Lenders in those five countries have taken about 715 billion euros from the ECB through emergency programs, including the LTRO, according to the most recent data provided by the central banks of those nations. Irish and Greek lenders have borrowed an additional 83 billion euros from their central banks, using collateral that isn’t accepted by the ECB.
The bond purchases helped bring down borrowing costs at first. The yield on Spain’s benchmark 10-year bond dropped below 5 percent in January from more than 6.5 percent in November. Concerns that a deepening recession will lead the government to default on its bonds have driven yields back to 6 percent and the cost of insuring Spanish debt to levels that prompted other European countries to seek bailouts.
IRELAND, PORTUGAL
Irish banks increased ownership of that nation’s sovereign debt by 21 percent in the three months ended in February, according to the Central Bank of Ireland.
Government-bond holdings by Portuguese banks jumped 15 percent to 30 billion euros in the same period, according to ECB data. While the central bank doesn’t provide a breakdown of the holdings by country, most debt sold by Portugal in recent months has been snapped up by its own lenders, according to two primary dealers who serve as middlemen in the sales and who asked not to be identified because the information isn’t public.
French and German banks bought the sovereign debt of other European countries last decade as the region’s financial sector became more integrated and interest rates declined. That process has been fragmented by the debt crisis.
Since 2010, banks in France and Germany have retreated, cutting lending to the governments of Spain, Portugal, Ireland and Greece 42 percent, according to data compiled by the Bank for International Settlements. Dumping Italian sovereign bonds began more recently, with German lenders reducing their Italian holdings 13 percent in the second and third quarters of 2011, BIS data show. French banks shrunk their holdings of Italian government debt about 25 percent in the third quarter.
DEBT RELIEF
While French and German banks lost money on Greece’s restructuring last month, a delay of more than a year allowed a similar shift of risk to the public sector. When the exchange took place, the debt relief was capped at 59 billion euros because fewer bonds were held by the private sector, including banks outside the country. If Greece had defaulted in 2010, the reduction could have been as much as 232 billion euros.
Greece had to borrow an additional 49 billion euros from the International Monetary Fund and the EU to recapitalize Greek banks that couldn’t handle losses on their sovereign-debt holdings during the restructuring.
“If there’s a private-sector restructuring of Portuguese sovereign debt, then Portugal’s banks will need a bailout like Greek banks did,” Dimitri Papadimitriou, president of the Levy Economics Institute at Bard College in Annandale-on-Hudson, New York, said in an interview.
REGULATORY PRESSURE
In Spain, stronger banks such as Banco Santander SA (SAN), the country’s largest lender, can handle losses from their sovereign holdings, while weaker savings institutions stung by soured real estate loans will need help, Papadimitriou said. Italian banks probably are buying more of their country’s debt because they can sell it to retail customers who still have an appetite for the securities, he said.
Lenders in peripheral countries are facing pressure from regulators and the ECB to buy government debt, according to two executives and a banking supervisor who asked not to be identified because the discussions are private. German and French regulators, meanwhile, have said they asked banks to cut lending to those nations.
“As German banks reduce their exposure and the domestic banks pick up the slack, credit is becoming national again,” said Michael Dawson-Kropf, a Frankfurt-based senior director at Fitch Ratings. “But in most cases, like Ireland, there aren’t enough domestic deposits to do that, so they need external financing.”
‘BACKDOOR EXPOSURE’
That’s when the ECB and other public lenders step in, creating a “backdoor exposure” for wealthier nations such as Germany, France and the Netherlands, said Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania.
“Private-sector banks offloading their obligations to the public sector doesn’t get the German taxpayer off the hook,” Egan said. His firm downgraded Germany’s sovereign credit to A+ in January, four levels below the top rating, amid worries that the country will have to rescue other EU nations.
Before the 2008 crisis, banks in Ireland held almost no Irish government debt. They owned about 20 percent of that nation’s sovereign bonds as of Dec. 31, according to data compiled by the Washington-based Institute of International Finance. In the meantime, the Irish government has pumped 62 billion euros into its banks to cover losses on real estate loans and now owns most of the banking system.
TIED AT HIPS
“The Irish government and the banks are tied at the hips,” said Constantin Gurdgiev, a finance lecturer at Trinity College in Dublin. “Banks get money from the government, which turns around and borrows from the banks. But how long can this game go on?”
Portuguese banks’ ownership of that country’s sovereign bonds jumped to 12 percent at the end of 2011 from 5 percent in 2007, according to IIF data. Spanish banks’ share of their government’s debt rose to 35 percent from 24 percent.
Meanwhile, foreign banks’ holdings of Spanish government debt dropped to 64 percent at the end of September from 74 percent a year earlier, IIF data show. In Ireland, the share declined to 23 percent from 27 percent, and in Portugal it fell to 19 percent from 26 percent.
‘NATIONAL FRAGMENTATION’
“This national fragmentation of credit is beginning to undo the financial integration that was one of the biggest benefits of the monetary union,” said Hung Tran, deputy managing director of the IIF, which represents more than 400 banks worldwide. “It’s not reducing the vulnerability of the banking system to the sovereign risk either.”
The ECB’s emergency-lending programs can provide indirect support for governments, “but only if sovereigns are perceived by markets to be going in the right direction,” David Mackie, chief European economist for JPMorgan Chase & Co., wrote in an April 10 note to investors.
“If there are doubts about the path ahead for sovereigns, then longer-term financing for banks will not necessarily provide much support as domestic banks may be reluctant to buy and other holders of sovereign debt may be keen to sell,” wrote Mackie, who is based in London.
Spain, Portugal, Italy, Ireland and Greece relied on banks in countries with stronger economies to finance their budget deficits for a long time, said Jan Hagen, a banking professor at Berlin’s European School of Management and Technology. With those lenders now weakened by losses and pressed to reduce risk, governments will struggle to finance themselves as the rest of the world stays away, he said.
“Governments loved the banking sector’s growth in the last two decades because they could borrow so easily,” Hagen said. “It was like a drug addiction. But like all addictions, it probably will end in a bad way.”
DETAILS OF THE $291 TRILLION IN DERIVATIVES TO WHICH AMERICAN TAXPAYERS ARE EXPOSED
April 17, 2012, at 10:47 pm
by Jim Sinclair in the category SeekingAlpha.com |
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Email This Post
by Jim Sinclair in the category SeekingAlpha.com |
Print This Post | Email This PostDear CIGAs,
This article was called to my attention by the legendary CIGA Green Hornet. It is simply too good, too correct and too educational not to be published. For those with the attention span larger than gold fish, this must be read and understood. Today’s JSMineset is big but there is a great deal to say. You might consider printing it out, and taking it in smaller doses.
Details Of The $291 Trillion In Derivatives To Which American Taxpayers Are Exposed April 17, 2012 |
The entire US GDP is less than $15 trillion each year. The gross notional amount of derivatives issued in the USA is more than $291 trillion. Does that sound like a lot? Apologists for derivatives dealers don’t like it when we talk about derivatives in terms of the notional totals. Large numbers, like these, discussed publicly, frighten too many people. According to the apologists, gross "notional" is misleading, because it does not include "hedges," offsets and the limits on interest rate risk.
In fact, the total amount of derivatives cannot be accurately presented in any other form but gross notional obligations. The risk to society cannot be judged in any other way. That’s why the FDIC, US Comptroller of the Currency and the Bank for International Settlement (BIS) all use gross notional.
Final net obligations can only be determined when and if derivatives are triggered. The net can be significantly lower, but neither we, nor the banks themselves actually know exactly what that is. It depends upon the balance sheets of every counter-party, and the extent to which interest rates will change in the future. Not even the banks have full information about either topic..
There is another number called the "net current credit exposure" (NCCE) that some erroneously claim represents the risk imposed by derivatives. According to the Office of the Comptroller of the Currency (OCC), the NCCE for American bank derivatives amounts to about $370 billion. That’s a huge amount of money, but it’s not $291 trillion.
Unfortunately, NCCE provides no information about ultimate exposure to loss. It merely measures the net cost of unwinding the contracts, before the occurrence of any trigger event. NCCE is the current market value of the contracts, and nothing more.
There are also a number of "value at risk" calculations that the banks provide. These are not standardized, and are based upon vastly different models and assumptions, from bank to bank. Unfortunately, a very high level of inconsistency and lack of any standards for measurement causes such models to be highly unreliable. For example, during the 2008 credit crisis, similar proprietary models used to determine subprime credit risk failed, in the infinitely smaller subprime mortgage market.
In reality, it is impossible to know the true risk of $291 trillion in New York issued derivatives (ignoring the additional $417 trillion issued out of London). A sudden very large increase in interest rates, alone, could trigger trillions of dollars in payments. One could argue that the Federal Reserve could force interest rates down at any time, but that is not entirely true.
If the US dollar came under heavy selling pressure, for an extended period of time, as has happened to the British pound, Chinese yuan, Japanese yen, German mark, Austrian shilling, Argentine peso, and a host of other currencies in the course of history, the Fed would be able to defend the dollar only at the risk of inducing widespread systemic failure.
That is why interest rates cannot rise for many years, regardless of whether that destroys its status as the world’s reserve currency, and/or creates extreme levels of inflation or hyperinflation. It is also one more reason for the government to lie about the true inflation rate, to avoid pressure to raise interest rates (see shadowstats.com.)
All the too-big-to-fail (TBTF) banks, with the exception of Morgan Stanley (which uses its SIPC-insured division) are using FDIC-insured depository divisions to house derivatives. That provides them with lower collateral requirements because FDIC depositary units usually have higher credit ratings than investment banks and/or bank holding companies. It also means that, ultimately, the American people will pay for losses.
While no one can determine the exact exposure, it is safe to say is that the risk is astronomical, and imposes a grave risk upon American taxpayers. It is not surprising that FDIC staff is not thrilled with US bank derivative exposures. In fact, Sheila Bair, who until recently ran the FDIC, is as disgusted with the Federal Reserve slush fund and the banking cartel as you and I. A few days ago, she penned a satirical article heavily critical of Fed policy and published it in the Washington Post.
The FDIC staff doesn’t like the fact that the Federal Reserve keeps allowing banks to put their derivatives inside insured depositary institutions. This is mostly for the same reason the banks want to put them there. Insolvency laws provides priority to derivatives counter-parties over the FDIC. If and when a bank is liquidated, the FDIC will be on the hook to repay depositors, but the failing bank will be stripped of all assets.
The US government’s full faith and credit guaranty means massive amounts of new US Treasuries will need to be sold, massive numbers of new counterfeit dollars will need to be printed under color of law, and significant tax hikes will need to be levied to pay the bill.
FDIC opposition, however, has had little to no effect on keeping derivatives out of insured units. The Federal Reserve, and not the FDIC, has the authority to approve the practice and it keeps doing so. The FDIC staff can complain privately, and issue regulations forcing disclosures, but little more. But, because of the disclosure requirements, more detailed information than ever is now available concerning derivatives.
In fact, FDIC has made far more information about derivatives public, over the last 3 years, than the Fed and OCC ever disclosed over decades. The numbers reveal a frightening concentration of risk. Five large "TBTF" US banks hold 96% of derivatives issued in the United States.
But the Bank for International Settlements in Switzerland reports that about $707.6 trillion worth of derivative obligations have been issued worldwide as of the end of 2011. That leaves about $417 trillion worth of derivatives that are not accounted for, in the FDIC records.
The surplus derivatives have been written mostly in London. Part of the exposure is held on the balance sheets of foreign, mostly European banks, including Deutsche Bank, PNB Paribas, Credit Suisse, UBS et. al. But, a large number of seemingly foreign derivatives is also hidden inside bank divisions, owned by American institutions, who do business in London. Such derivatives are not reported to the Fed, the OCC or the FDIC. Lenient British banking laws insure that these opaque obligations are not subject to public scrutiny.
Ultimately, if London-issued derivatives eventually cause massive losses to a UK bank division, the US based bank that owns it would end up being closed or bailed out. Ultimately, just like the derivatives issued in New York, the American taxpayer and dollar-denominated saver will pay the bill. Unfortunately, in spite of this, details about London-issued derivatives are not publicly disclosed or I cannot find them. If such data exists, a British lawyer or someone knowledgeable enough about UK regulations and bureaucracy would be needed to ferret it out.
Even in the absence of London data, however, investors should find this incomplete article enlightening. It is useful to obtain a general picture of the risk of investing in shares of the five big derivatives dealers. Here’s how the dollar amounts break down, as of December 31, 2011 in thousands of dollars.
JPMorgan Chase (JPM)
Description | Amount | |
Total Derivatives | 70,268,515,451 | |
Notional amount of credit derivatives: | 5,775,740,000 | |
Bank is guarantor | 2,920,886,000 | |
Bank is beneficiary | 2,854,854,000 | |
Interest rate contracts | 53,708,319,000 | |
Notional value of interest rate swaps | 38,805,453,000 | |
Futures and forward contracts | 7,033,041,000 | |
Written option contracts | 3,841,178,000 | |
Purchased option contracts | 4,028,647,000 | |
Foreign exchange rate contracts | 8,799,397,451 | |
Notional value of exchange swaps | 2,934,191,451 | |
Commitments to purchase foreign currencies & U.S. Dollar exchange | 4,521,035,000 | |
Spot foreign exchange rate contracts | 116,741,000 | |
Written option contracts | 674,276,000 | |
Purchased option contracts | 669,895,000 | |
Contracts on other commodities and equities | 1,985,059,000 | |
Notional value of swaps | 453,521,000 | |
Futures and forward contracts | 137,101,000 | |
Written option contracts | 746,259,000 | |
Purchased option contracts | 648,178,000 |
Bank of America (BAC)
It should be pointed out that BAC has recently moved a nominal value of about $22 trillion worth of derivatives from Merrill Lynch, into its FDIC insured division. This does not appear to be showing up, yet, in these numbers. The total for BAC’s FDIC insured division is now closer to $72 trillion.
Derivatives | 50,407,550,785 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional amount of credit derivatives: | 4,720,320,266 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank is guarantor | 2,342,544,257 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank is beneficiary | 2,377,776,009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate contracts | 40,832,704,946 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional value of interest rate swaps | 29,707,570,138 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures and forward contracts | 8,203,345,962 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Written option contracts | 1,430,677,395 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased option contracts | 1,491,111,451 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange rate contracts | 4,676,887,004 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional value of exchange swaps | 1,425,870,031 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments to purchase foreign currencies & U.S. Dollar exchange | 2,839,430,866 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Spot foreign exchange rate contracts | 254,990,960 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Written option contracts | 204,427,019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased option contracts | 207,159,088 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contracts on other commodities and equities | 177,638,569 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional value of swaps | 76,992,166 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures and forward contracts | 343,077 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Written option contracts | 44,438,807 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased option contracts | 55,864,519 Citigroup (C)
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