Wednesday, October 1, 2008

Greed is Global

Per Infectious Greed:

Europeans banks have long been gaming their regulators, having far less than the actual capital reserves that they needed given their balance sheets. AIG filled the hole, selling credit defaults swaps to European banks via which they could tell regulators that they were adequately covered -- at triple-A, no less -- while carrying less cash than required.
How large scale was this "gaming"? According to AIG, about $379 Billion of their $527 Billion default swap portfolio:
"represents derivatives written for financial institutions, principally in Europe, for the purpose of providing them with regulatory capital relief rather than risk mitigation."
According to analysis done by CEPS, banks were levered as much as 60x. The biggest culprits? UBS, ING, Barclays, and Deutsche bank.

Remember these names and let the write-downs continue...