Building bank liquidity buffers, the FHLB, TBTF, WTF way

Hey did you hear the Fed finalised its liquidity coverage ratio rules for large US banks?

Yep, you can read the announcement hereRead more

Goldman’s Symphony of Babble


… And they said, Go to, let us build us a city and a tower, whose top may reach unto heaven; and let us make us a name, lest we be scattered abroad upon the face of the whole earth.

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Bonfire of the bond funds

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Are you there hedge funds? It’s me, JPMorgan

Are you a hedge fund with a prime broker who happens to be a large bank?

Are you worried that said prime broker will no longer be able to make a lot of money from doing business with you, because of new banking regulation such as the liquidity coverage ratio (LCR), the net stable funding ratio (NSFR) or various types of leverage ratios?

Well, then JPMorgan Chase has some advice for you! Read more

Is leveraged lending guidance effective? Yes, no, maybe

Last year the Federal Reserve and the Office of the Comptroller of the Currency issued new leveraged lending guidance designed to discourage big banks from underwriting risky new loans. Off the menu were loans with more than six times leverage, or that exhibited certain signs of weak underwriting or covenants. Since then, the regulators have double-down on the guidance — warning banks they should hardly ever do loans that are unlikely to pass muster.

So, more than a year later, it’s worth asking whether the guidance has had any effect. Read more

About that Deutsche Bank capital…

Gather round nerds, and hear the tale of Deutsche Bank’s mysterious new CoCo bonds.

It’s a tale that involves an €8bn capital raising anchored by the Qataris, some German accounting standards and one terrible cereal-based pun. Read more

When corporate credits fall out of the sky

Paging Bruno Iksil.

It’s well known that JPMorgan lost $6bn in its ill-fated “London Whale” investment. What is less known is that shortly before the bank’s unwieldy multi-legged play on corporate credit ballooned to unsustainable proportions, the positions taken on by JPMorgan produced almost half a billion dollars worth of profits thanks to the bankruptcy of a single company — American Airlines. In fact, one could easily make the case (as the US Senate did) that the easy money reaped by JPMorgan from the AMR filing helped catalyse the CIO’s doomed love-affair with low-cost default protection. Read more

Carry on conduits

After the deluge comes … erm … the deluge.

Commercial Mortgage Alert reports that 37 shops are now in the business of actively originating commercial mortgage-backed securities (CMBS). That’s up from 27 such CMBS “conduits” in existence a year ago, and just shy of a peak of 38 originators tallied in 2007 and 2008. That’s pretty impressive work for a market that all but collapsed after the crisis. Read more

I, Claudius, caller of bank bonds

Claudius was a Roman emperor from AD 41 to 54.

Claudius notes are Tier 1 instruments that were issued by Credit Suisse back in 2010 and which feature a call date that first comes into effect in December 2015. Except, as bank bond investors have experienced from time to time, the issuers of such securities have an unnerving tendency to sometimes behave unexpectedly. Credit Suisse made some noise when it released earnings last week that it may call the Claudius bonds thanks to something known as a “regulatory par call.” Read more

Not all securitisation bankers are evil – some are just slow

This occasional Alphaville contributor just got back from a prolonged reporting stint in Las Vegas.

On the agenda was not one but two securitisation conferences. Some readers may recall that the American Securitization Forum (ASF) has for many years hosted an annual gathering, most often in the pleasant confines of the Aria hotel in Las Vegas. This year, a bitter schism within the securitisation industry meant there were dueling conferences – one organised by the ASF and the other by the break-away Structured Finance Industry Group (SFIG). Read more

DVA, CVA and FVAaaaaaaargh!

Much accounting intrigue in JPMorgan’s recently-released fourth-quarter results.

According to the bank, it incurred a $1.5bn hit to net revenue after “implementing a funding valuation adjustment.” Read more

Back to the future with commercial paper

Commercial paper has a long and varied history.

Initially a form of promissory notes sold by companies, the short-term debt became (in)famous after banks co-opted the stuff in the run-up to the financial crisis — selling hundreds of billions of dollars worth of the paper as a way of raising cheap short-term financing. Buyers of the bank-issued paper got nervous during the crisis, and financial institutions soon found themselves unable to roll over the short-term financing, exacerbating the general freezing of markets. Read more

Zions Bancorp and some biblical bank accounting

 

We haven’t forgotten who keeps us in business,” reads the slogan on the website of Zions Bancorp, Utah’s biggest bank. Read more

It’s leveraged super senior, Jim, but not as we know it

They’re baa-ack.

Euromoney reports on Wednesday that Citigroup is attempting to revive “leveraged super seniors,” a type of synthetic CDO not seen seen the financial crisis. We take a (no doubt unhealthy) interest in all things LSS, given our previous experience helping out on this series of Financial Times stories. The stories involved three former Deutsche Bank staff who blew the whistle on the way the German bank was allegedly valuing so-called “gap risk” on $130bn worth of LSS of trades. Read more

Goldman’s not-so-great currency caper

Alternate title – Did Goldman Sachs lose $1.3bn in currency trades in the third quarter, or not? Read more

Private capital now, say hedge funds with Frannie preferreds

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HEDGE FUNDS – Place your advertisement HERE

And enjoy sub-par returns for the next 12 months.

No, this is not FT Alphaville’s marketing department shooting itself in the foot. This is the conclusion of a recent paper examining the effect of advertising on hedge funds’ inflows and returns. Read more

Midnight Madness is expanding, practice your lateral thinking here

Midnight Madness, that Goldman Sachs-led all-night lavish scavenger hunt/puzzle-solving competition/performance art so wonderfully described by Quartz earlier this year, is back and expanding. This year the charitable event will include Citigroup, Credit Suisse, BlueMountain, and Secor Asset Management all fielding teams to compete against Goldman.

Below you can see the pitchbook that was sent to potential participants (in typical banking style) earlier this year: Read more

Digging into dealer inventories

There’s an oft-quoted number in the debate raging over liquidity in the bond market.*

It is, depending on the week, 75-78 per cent — the amount by which dealer banks’ inventories of corporate bonds are said to have declined since their peak of $235bn in 2007, according to Federal Reserve dataRead more

Nothing screams shadow banking quite like a leveraged loan ETF

They are billed as a quick and easy way for investors to gain access to higher-yielding assets while still providing some protection if interest rates start to rise. They are ETFs which track portfolios of (floating-rate) bank loans.

And they are on fireRead more

Price discovery, sending Goldman Sachs a message edition

How much would you pay to make Goldman Sachs feel slightly uncomfortable?

The City of Oakland, California plans to dish out $226,378. Read more

Wanted at Goldman Sachs: Compliance person with aversion to French, fabulousness

Spotted on the Goldman Sachs careers website…

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Introducing the Winklevoss Bitcoin Trust

Click to read - Winklevoss Bitcoin Trust S-1 filing

That’s a SEC filing for the Winklevoss twins’ brand-new Bitcoin exchange-traded fund. For realz. Read more

Subprime securities – still being downgraded

If you woke up on June 10, 2013 and thought the subprime securities crisis was behind us, well, you were wrong.

Some two weeks ago Moody’s announced it was downgrading 28 tranches of various bonds (as well as upgrading two tranches, and confirming others) in an action that covered roughly $1.2bn worth of mortgage-backed securities (MBS). Read more

All up in Bloomberg’s broker-dealer business

The world is becoming intimately acquainted with the technical ins-and-outs of the Bloomberg LP empire.

There is Bloomberg’s bread-and-butter business of selling sophisticated data terminals to thousands of banking, hedge fund and regulatory authorities around the world. There is also the well-respected news wire run by Matt Winkler. Read more

How to snoop on your customers, the Bloomberg way

Here’s a moderately informative activity for a Friday afternoon.

Log on to your Bloomberg terminal. Type UUID <GO> Read more

The OC (of Greek covered bonds)

Eurobank recently lowered the over-collateralisation (OC) of its second covered bond programme to the bare minimum allowed by Greece’s covered bond law. Avid covered bond-watchers (there must be a handful of you out there) will know of course, that specially designed legal frameworks are one of the big perks of the covered bond structure – along with juicy benefits like an overstuffing of assets and the dual recourse nature of the centuries-old debt instruments. Read more

Cut and paste – your guide to ‘economic’ vs ‘regulatory’ liquidity

Are you a bank agonising over whether to keep your triple A-rated covered bonds as part of your liquidity buffer or send them to the European Central Bank? Not sure what to do with your AA-rated non-financial euro corporate debt?

Then you need this handy table from BofAML’s structured finance guru, Alexander Batchvarov. Read more

Let’s talk about Goldman’s prop-trading

GOLDMAN SACHS HAS A SECRET PROPRIETARY-TRADING UNIT THAT IS RISKING THE BANK’S OWN CAPITAL BY MAKING INVESTMENTS AND CEO LLOYD BLANKFEIN SAID GOLDMAN WASN’T PROP-TRADING ANYMORE AND THAT IS WRONG AND HE LIED AND HE SHOULD BE HOG-TIED WITH HIS OWN BLACKBERRY CHARGER.

That’s a typical reaction to this Bloomberg piece on Goldman’s “secret” prop-trading team for you. Read more

A tale of two VaRs

Buried in Morgan Stanley’s decent third-quarter results (excluding the absurdity that is DVA of course) is this intriguing footnote:

Morgan Stanley’s average trading Value-at-Risk (VaR) measured at the 95% confidence level was $63 million compared with $76 million in second quarter of 2012 and $99 million in the third quarter of the prior year. The Firm modified its VaR model this quarter to make it more responsive to recent market conditions.

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