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Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure

hvactec

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Is Morgan Stanley Sitting On An FX Derivative Time Bomb?



The latest quarterly report from the Office Of the Currency Comptroller is out and as usual it presents in a crisp, clear and very much glaring format the fact that the top 4 banks in the US now account for a massively disproportionate amount of the derivative risk in the financial system. Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively. And that's your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all time high and up $5.3 trillion from Q1 as they have to risk ever more in the derivatives market to generate that incremental penny of return.

read more Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb? | ZeroHedge
 

waltky

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Granny says is about time Wall St. started payin' fer dey's shenanigans an' sufferin' like the other 99%...
:redface:
Citi to slash bonuses, cut 150 Wall Street jobs
November 29, 2012 - Citigroup plans to shrink bonuses and cut 150 jobs from its investment banking and trading units.
Citigroup Inc.’s trading and investment-banking unit plans to eliminate 150 more jobs while shrinking bonuses by as much as 10 percent, extending the toll of Wall Street’s revenue slump, two people with direct knowledge of the decisions said. The dismissals, which will occur this quarter at the New York-based firm, will affect businesses including equities trading and underwriting, said one of the people, who requested anonymity because the plans haven’t been announced. While bonuses for this year will shrink across the securities and banking division, which employs about 17,000 people, top performers are likely to be spared reductions, the people said.

Chief Executive Officer Michael Corbat, 52, who took charge of Citigroup last month, joins Wall Street leaders in facing an industrywide slump in trading and investment-banking revenue, stiffer capital requirements and Europe’s debt crisis. Goldman Sachs Group Inc., Morgan Stanley and UBS AG are among rivals focused on reducing costs. The latest job cuts at Citigroup, the third-largest U.S. bank, were already in the works under Corbat’s predecessor, Vikram Pandit, one person said. “We have been making targeted headcount reductions throughout the year in certain businesses and functions across Citi as part of our efforts to control expenses during the current environment,” Danielle Romero-Apsilos, a spokeswoman for Citigroup, said in an e-mailed statement.

Reducing Staff

Firms across Wall Street are firing employees and disposing of assets as they deal with new rules aimed at strengthening capital, cutting risks and preventing another financial crisis. UBS, whose home country of Switzerland has imposed some of the most stringent capital requirements, said last month it’s largely exiting fixed-income trading. Investment banks’ cost-cutting needs to be severe to deal with the impact of the rules, Sanford C. Bernstein analysts said this month. Firms must slash pay and headcount and get rid of almost a third of their trading-business assets to earn even half the returns they once made, while replacing some traders with computers, the analysts wrote. Citigroup’s planned job cuts add to 1,200 dismissals that the lender announced for the securities and banking division in January, which included firings of technology and operations employees. By July, Citigroup decided to eliminate 350 more jobs, a person with knowledge of the matter said at the time.

Bonuses Cut
 

Katzndogz

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No one remembers the weekly bank seizures where the government seized small banks and gave them to bigger banks. What did you think was going to happen?
 

whitehall

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You really gotta wonder about the progressive mindset. Elected representatives make the laws that corporations and banks have to follow and then they complain when things go wrong. Politicians aren't that smart or that honest for that matter but left wingers think the federal government needs to get bigger and more powerful. The Tea Party people had the right idea to recruit honest and conservative politicians but the progressives hate them and hate the idea of trimming big government so we go round and round about big banks and stupid politicians.
 

Michael.Paul

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It did not happen overnight. Most of the large mergers that were subject to anti trust regulations were signed off without a hitch. Consolidation has hurt consumer choice, given us TBTF institutions and has rendered regulators nearly obsolete.
 

whitehall

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It did not happen overnight. Most of the large mergers that were subject to anti trust regulations were signed off without a hitch. Consolidation has hurt consumer choice, given us TBTF institutions and has rendered regulators nearly obsolete.

Why were (illegal?) mergers signed off without a hitch or were the mergers legally taking advantage of loopholes in the law hammered together by amateurs who didn't have a clue or criminals who thought they could make a buck in the long run? Don't blame banks for bank robberies. The fault ain't with banks and corporations. They do what they can to offer products at a price that will make money. The problem is....duh with the (corrupt?) politicians.
 

Oddball

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Is Morgan Stanley Sitting On An FX Derivative Time Bomb?



The latest quarterly report from the Office Of the Currency Comptroller is out and as usual it presents in a crisp, clear and very much glaring format the fact that the top 4 banks in the US now account for a massively disproportionate amount of the derivative risk in the financial system. Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively. And that's your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all time high and up $5.3 trillion from Q1 as they have to risk ever more in the derivatives market to generate that incremental penny of return.

read more Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb? | ZeroHedge
Fret not...Baghdad Ben and the Fed will prolly buy those up too.
 

iamwhatiseem

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As with any market investment, it is a matter of when, not if, when over-valuation and over-investment occurs and a correction WILL occur.
The problem with the derivative market is it is mostly unregulated, no one can really even tell you what many of them are specifically made up of. It is little different than if these banks were playing monopoly - but with real money.
Someone is going to lose - big.
It is a matter of when, not if.
 

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