Banks Are Back Into Credit Derivatives
Barclays struck a $1.1 billion deal with Blackstone this week to offload risks in its US credit-card business
It is part of a growing trend of risk-transfer deals mainly by European banks to shore up their balance sheets and capital ratios.
The total volume of such deals hit nearly €200 billion ($215 billion) in 2022
They’re known as capital relief trades, or synthetic (or significant) risk transfers and they are likely to become more popular as lenders adjust to tougher banking regulations
These deals are mostly private and bilateral, so they aren’t easy to track. Barclays and Deutsche Bank are unusual in talking about them publicly at all.
The whole idea of anything synthetic, private, complicated and involving derivatives of credit risk still has a bad name from the crisis of 2008.
Paul J. Davies Bloomberg 29 februari 2024
U.K.-based Barings merchant bank, established in 1762, was brought to its knees by rogue trader Nick Leeson,
who in 1995 ran up $1.3 billion of losses in unauthorized derivatives trades.
- Jag återvände från Singapore 1999, ansvarig för förluster på 862 miljoner pund som knäckte Storbritanniens äldsta investeringsbank, personligen dömd som ansvarig för 100 miljoner pund, och fick ändå inom loppet av en vecka erbjudande om fem olika kreditkort.
Nick Leeson, SvD Brännpunkt 21/9 2008
https://englundmacro.blogspot.com/2023/03/the-collapse-of-svb-at-speed-not-seen.html
In 1872, when Phileas Fogg, Jules Verne’s enigmatic character, wagered with his whist partners at London’s Reform Club,
including an assistant governor of the Bank of England, to travel around the world in eighty days, he issued a cheque for £20,000, drawn on Baring Brothers.
That was sufficient, as his cheques were paid on sight, and he had joined the club on the recommendation of Baring Brothers, which had given him an unlimited overdraft facility.
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