Removing funds from Barclays

free4440273

^Gold Standard has been abolished

devils_advocate

Generali wrote: »

Been reading some interesting (to me) stuff about investment banks and the new way of measuring reserves -

What's the new way? Are you talking about FAS 157/159?

SquatNow

devils_advocate wrote: »

What's the new way? Are you talking about FAS 157/159?

FAS 157/159 is irrelevant thanks to that new fund they just created.

If you have to price assets based on market value, what you need is someone prepared to buy them at full "price". That someone doesn't actually have to BUY them, they just need to be PREPARED to buy them. The "buyer" is willing to buy but the "seller" the refuses to sell.

I get the impression the reason it took them so long to sort out this fund was they had to make sure they all agreed not to suddenly decide to sell and take the $75bn.

The fund will probably buy up a few billion dollars worth to show it really is prepared to buy, and may use the rest of the $75bn to buy up junk from any small funds going bust so it doesn't get sold on the open market and cause a cascade.

If that happen the big banks who setup the fund will end up buying even more junk at FULL PRICE through their ownership of the fund, but that doesn't matter, they just need to make sure no-one sells in the open market which would force them to write down hundreds of billions of dollars from their assets.

danm

If barclays does get into trouble my reconing is that there will be no run, as no-one will even know about it. It will be kept out of the public domain to be dealt with in a rational way.

The biggest mistake that the BOE/FSA etc made with NR was making the information public as they were not able to chnage their criteria for lender of last resort soon enough.

It is widely felt in the banking industry that more than one bank has been bailed out by the ECB recently, but this has been kept under wraps. The ECB is lending billions everyday to a wide range of institutions under Repo agreements as the traditional markets are thin in liquidity.

danm

I dont see how the new Fed Acct Stnds are irrelevant. Goldmans, Merrills etc are holding about 6-7% of total assets as level 3. They therfore price these internally while there is no market price.

2 sceanrios, banks could either be under or over-valuing these assets, thefore incrasing or decreasing their write-downs.

under valuing i can understand. Write down further than required. When buyers come back you can start to re-price and sow a bigger profit than otherwise. My concern is how much of these level 3 assets are being held at inflated values still.

And remeber. its not just banks. Pension funds etc are also donig the same.

abaxas

danm wrote: »

I dont see how the new Fed Acct Stnds are irrelevant. Goldmans, Merrills etc are holding about 6-7% of total assets as level 3. They therfore price these internally while there is no market price.

2 sceanrios, banks could either be under or over-valuing these assets, thefore incrasing or decreasing their write-downs.

under valuing i can understand. Write down further than required. When buyers come back you can start to re-price and sow a bigger profit than otherwise. My concern is how much of these level 3 assets are being held at inflated values still.

And remeber. its not just banks. Pension funds etc are also donig the same.

Sorry for being rude... but.

Think of level 3 assets like this..

A sperm bank gives me £20 every-time I donate.
I can have 5 ham-shanks a day.
7 days a week
52 weeks a year
77 years (-12 say?)

so 20*5*7*52*65= £2,366,000

Hence I have over 2 million pounds of assets if brought to market at the right time. Or £20 of assets of forced to sell them quicky.

Also if everyone tries to sell their sperm at the same time, the price will go down. Might only get £5 a pop.

Debt_Free_Chick

poppy10 wrote: »

Barings?
BCCI?

Barings didn't go bust - it was sold to ING, who took on all Barings' liabilities. And it didn't take individual deposits from savers anyway.

BCCI didn't go bust - it was closed down by the Bank of England after they commissioned an investigation (based on suspicion) and found BCCI to be involved in tax evasion, money-laundering and terrorism. The Liquidators are still operating and still paying dividends to creditors (more than 75% of debts to creditors have been repaid).

BCCI only took on "high net-worth" individuals so "ordinary savers" didn't have deposits with them.

Generali

The thing that I was interested in that I read concerned FSAS157.

Greed and Fear divided Tier 3 assets by total equity attributable to shareholders:

Morgan Stanley 2.50
Goldman Sachs 1.84
Lehman Brothers 1.60
Bear Stearns 1.56
Citigroup 1.06
Merrill Lynch 0.70
Wells Fargo 0.47

JP Morgan 0.32

Of course this doesn't mean disaster for Morgan Stanley and Goldmans but it does highlight the precarious position that investment banks might be in.

By comparison, Barclays non-loss of £10billion was about 1/3rd of total shareholder equity

danm

abaxas wrote: »

Sorry for being rude... but.

Think of level 3 assets like this..

A sperm bank gives me £20 every-time I donate.
I can have 5 ham-shanks a day.
7 days a week
52 weeks a year
77 years (-12 say?)

so 20*5*7*52*65= £2,366,000

Hence I have over 2 million pounds of assets if brought to market at the right time. Or £20 of assets of forced to sell them quicky.

Also if everyone tries to sell their sperm at the same time, the price will go down. Might only get £5 a pop.

Level 3 assets are typically structured illiquid assets for which there is no active secondary market. In your example, it is obviously liquid:p

i know what level 3 assets are, my point was that as these are level 3, hence no market price etc etc. banks are effectively putting what price they want to on these assets so still no one is sure where the losses are, hence continued illiquidity.

in the majority of cases these write-downs are not because banks are selling at a loss, but because they are holding assets at lower values. Assets being held at say 90% in level 3, may only be worth 50% were they able to obtain a market price in level 1 or 2. hence approx a 50% write down on another 6-7% of assets.

danm

Barlcays reported £1.3bn losses. They had already announced 500mm so another 800m is pretty good going comparatively