BNP Paribas - Not Learning the Lessons

Generali

The Guardian has published a fascinating (to me) list of sovereign exposures for different banks.

http://m.guardian.co.uk/news/datablog/2013/mar/26/europe-banks-sovereign-exposure

As you doubtless remember, the credit crunch was announced by BNP Paribas effectively running out of cash as the money markets closed. So now that the credit crunch has moved on to sovereign debt, who do you think has almost 30% of their reserves held in Belgian Government bonds? That's the Belgium that took 541 days to decide on a Government and has a debt:GDP ratio above 100%.

Sheesh!

CLAPTON

One might conclude that a country without a government but a well mannered population, is financially a lot saver than a country with a government that wishes to guarantee mortgages for people that can't afford them.

michaels

Despite all the debt issuance the global stock of triple A bonds is falling (FT). Lots of funds/reserves have to be in triple A instruments - could there be a point when there are not enough to go round? Will this result in the price of AAA being bid up or will regulatory rules be relaxed?

Thrugelmir

Figures that caught my eye.

BANCO SANTANDER S.A. Spain Spain 55,326.46 77.1%

There's a bank totally exposed to a single market.

No wonder they are pulling back on UK lending.

Thrugelmir

Generali wrote: »

As you doubtless remember, the credit crunch was announced by BNP Paribas effectively running out of cash as the money markets closed.

Was another issue.

French bank BNP Paribas has suspended three of its funds on Thursday as problems in the U.S. subprime mortgage sector are preventing it from calculating their value.

BNP Paribas Investment Partners said in a statement that the decision affected its Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia funds.

It said the valuation of the funds would resume a soon as liquidity returned to the market and added that in the continued absence of liquidity, additional information on the envisaged measures would be communicated to investors within a month.

A spokeswoman for BNP could not immediately comment on the latest net asset value of the three funds.

BNP shares were indicated down 2.6 percent.

"The complete evaporation of liquidity in certain market segments of the U.S. securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating," it said.

"In order to protect the interests and ensure the equal treatment of our investors, during these exceptional times, BNP Paribas Investment Partners has decided to temporarily suspend the calculation of the net asset value as well as subscriptions/redemptions, in strict compliance with regulations, for these funds," it added.

NR collapsed as wholesale money markets froze on the back of this.

Generali

michaels wrote: »

Despite all the debt issuance the global stock of triple A bonds is falling (FT). Lots of funds/reserves have to be in triple A instruments - could there be a point when there are not enough to go round? Will this result in the price of AAA being bid up or will regulatory rules be relaxed?

That was one of the reasons for the AAA CDO debacle: regulators made AAA rated debt much more desirable to hold and the market satisfied that demand.

Of course banks can always just hold cash at the Central Bank in reserve. That should always be AAA. The problem is, those holdings don't provide any income which means a huge cost to the banks and is another pressure on them to reduce the size of their balance sheets.

For now, BNP's holding is fine. In the risk on/risk off trading pattern we saw up to about 6 months ago, Belgian bonds were clearly seen as low risk. As BNP makes up 7% of the market that's good for them but with Belgium's deficit slated to be 4% for 2012-13 and little less than that for 2013-14 there has to come a point where this is unsustainable.

purch

It's quite remarkable how it appears that some of the Banks on that list still appear to have exposures today that align closely with their historical ties.

Banque de Paris et des Pays Bas was established to facilitate trade with Belgium and Holland.

Similarly Credit Agricole always had close ties to similar Banks in Italy, and Societe General de France to Germany.

Banque National de Paris had historic ties towards London but they appear to have forgotten that :eek:

I am sure a closer look at the list would reveal similar historic links

purch

Whilst on the subject shall we play the "name 5 famous Belgians" game ?

No wiki-ing allowed (that includes you too grizzler !!!! )

purch

1. Ivo van Damme

Generali

purch wrote: »

It's quite remarkable how it appears that some of the Banks on that list still appear to have exposures today that align closely with their historical ties.

Banque de Paris et des Pays Bas was established to facilitate trade with Belgium and Holland.

Similarly Credit Agricole always had close ties to similar Banks in Italy, and Societe General de France to Germany.

Banque National de Paris had historic ties towards London but they appear to have forgotten that :eek:

I am sure a closer look at the list would reveal similar historic links

BNP bought Fortis too. That will have something to do with it too.

It just seems crazy time to have such a concentration of assets. Then again, who the hell are you going to sell a fifteenth of the Belgian national debt to?

mcfisco

2. Eddy Merckx