Bomb ticking for Oz banks off-balance gearings of 117 times

last SG · 2008-10-13T11:01:54+00:00

Well he's well known for trying to make a lot of suggestions to the Australian defence ministry on how to defend Australia better the lionnoisy way...Unfortu...

lionnoisy SG

During my research on Oz subprime exposures,i find out

the more horrible data.

Altogether,oz banks have OFF BALANCE SHEET items

of gearings of 117 times , exposed to derivative positions.

Even one % of loss will wipe out all the banks'

share holders funds.

http://www.theaustralian.news.com.au/story/0,,23229288-7583,00.html

Adele Ferguson | February 18, 2008

A TICKING bomb for the banking sector is its off-balance sheet activities, which at last count stood at $12.9 trillion.

Australian banks have a big exposure to derivative markets. Their total shareholder value of $110 billion is dwarfed by the size of the banks' collective exposure to derivative markets of $12.9 trillion.

Put simply, the total derivative positions of the banks are 117 times as big as the banks' shareholder value. If even 1 per cent of these derivatives contracts default because third parties at the other end get into trouble, the whole shareholder wealth would be wiped out and our banks could be broke.

Given total bank assets are $2.1 trillion, it begs the question why Australia's banks have exposure to $12.9 trillion of derivatives positions. All banks hedge to reduce risk, but this is a big amount of hedging.

For example, Westpac has a face value of $1.4 trillion in derivatives at September 30, 2007, compared with an equity base of $16 billion, which is a multiple of almost 100 times.

oz GDP is about A$1 trillion or 1,000,000 million or 1,000 billion.

US GDP is about US$14 trillion.

If u are a stake holder of oz,i suggest u spend ALL the free time of

next week to study this topic .

Fannies Mae gearings is about 70.

I am not belittle Oz,just want to blow the whistle!!

reference

http://www.rba.gov.au/Statistics/Bulletin/

Assets of Financial Institutions - B1
Banks – Assets - B2
Banks – Liabilities - B3
Banks – Consolidated Group Off-balance Sheet Business - B4

Sy Tr,pl dunt waste time.This is really a serious matter.

Help your frens in Oz and tell them,Let them decide.

u can quote the newspaper if u dunt want to offend them.

Tell them u come across this info .

May be he want to read.

or u pretend send the e mails to wrong person.

My dear fren,THis is not a drill.It is supported by official figures.

Dr Doom says he worry about UK and Oz.

i understand why now.

Insurers also fail

All company think they can hedge against the risks by buying insurance.

The fall of AIG speaks volume for this protection also not fool

proof.

Oz banks,i think,also adopt similiar protections.

The points are

U can see in the past 2 weeks u have to bite the bullets,even

u are very big.So,if oz banks loss in this gamble by little bit,

the consequences is not one or two or 3 big banks in trouble.

But the whole finance system.Possible outcome

-----oz dollar will drop like stone

-----share price drops fast

what else?

But,there is a slim chance that Oz banks may win.

What is the chance?

If u use $1 to do $ 117 business,it is not brave,but foolish.

@@@@@@@@@@@@@@

u can know every things about oz housing,finances,monetary

,reserves here:

http://www.rba.gov.au/PublicationsAndResearch/

angel7030 SG

So?

SingaporeTyrannosaur SG

This is happening in Singapore....

19/09/2008 - 08:03:54
The head of the Singapore unit of troubled insurance giant American International Group has resigned with immediate effect, the country’s central bank said today.

Mark O’Dell, general manager of AIA Singapore, has taken a leave of absence and Executive Vice President Kenneth Juneau will take over, said the bank, known as the Monetary Authority of Singapore.

AIG customers throughout Asia have cancelled policies this week amid fears AIG would follow investment bank Lehman Brothers Holdings into bankruptcy.

AIA Singapore headquarters has been flooded this week with thousands of nervous policyholders seeking to find out the status of their policies or cash them out, even after the US Federal Reserve pledged an 85 billion-dollar loan to prop up AIG.

The company said in a statement today that any policyholder who terminated their policy this week would be allowed to reinstate it during the next two weeks without penalty.

“We have received feedback that many of our customers are now more reassured of AIA Singapore’s financial position,” said Mark Wilson, regional president of AIG Life Companies in Asia Pacific.

“So we have offered this policy conservation programme to those policyholders who reacted to the uncertainty of recent developments at AIG.”

Less than 0.1 %, or about 2,000, of the company’s 2 million in force policies in Singapore – a nation of 4.6 million people – have been terminated this week, the company said.

Both AIA Singapore and the central bank reiterated that the company’s policies are safe.

“AIA maintains separate insurance funds for all policies,” the company said.

“AIA Singapore has more than sufficient capital and reserves above the regulatory minimum requirements to meet our obligations.”

AIG provides services in 130 countries, including China, Japan, South Korea and Taiwan.

SingaporeTyrannosaur SG

This is also not a drill:

Singapore - The Singapore chief of American International Assurance Co (AIA) resigned Thursday as surrendered policies mounted with hundreds of customers unconvinced of the insurer's soundness.

Mark O'Dell - who has been trying to persuade policyholders that AIA, a unit of the troubled American International Group (AIG) Inc, could meet its obligations - was said to be joining a rival firm and a new general manager would start Friday.

The company said O'Dell's decision was not related to the three days of customers withstanding long lines and sweltering heat to enter its service center. By the end of Thursday, those waiting were given numbers and told to return Friday.

'Even with the AIG bailout by the US government, everything is still uncertain,' said Karen Tan, a 42-year-old woman with no intention of keeping her policies.

The US Federal Reserve's 85-billion-US-dollar loan to AIG provided little solace and so many more questions in Singapore that the insurer opened a second service centre in the AIA Tower next door.

AIA said 2,500 policies had been returned by customers.

'Our response is to focus on serving their needs as they come in,' O'Dell said earlier. 'If they want a loan or if they want to surrender, we're going to process it as properly as we can.'

Wary policyholders were also lining up in Taiwan and Hong Kong.

Reassuring statements from AIA and the Monetary Authority of Singapore that the insurer could meet its obligations were on prominent display.

The insurer was said to be studying the option of allowing customers who terminated their policies to reinstate them without having to pay a penalty.

The Monetary Authority, the city-state's central bank, urged customers against terminating their policies, noting they could lose coverage and suffer losses.

'Things might get worse, and they'll need more money,' a businessman who requested anonymity said. 'I won't take that risk.'

With 4,000 agents and more than 2 million policies in force, AIA is the largest insurance company in the city-state.

SingaporeTyrannosaur SG

Temasek Selling Merrill Lynch
Half or total of 87m shares have been sold off at a loss, according to US recorded filings. By Seah Chiang Nee
Jul 24, 2008

Temasek Holdings has sold off half its ill-timed investment in Merrill Lynch - or about 87m shares, according to a mutual funds report on institutional trades on US stocks.

The online report, MFFAIRS (Mutual Fund Facts About Individual Stocks), reported it sold off 86,949,594 shares (50%), leaving a current holdings of 86,949,594 shares (50%), according to the filings made public.

The report gave no exact date or price of the sale.

(Update: Making no reference to Mffairs reported sale, aTemasek source says its ML shareholding has remained unchanged at 86.9m since March. See accompanying story).

Neither has there been any confirmation from Temasek, which had paid US$48 a share last year. http://www.mffais.com/newsarticles/2008-07-22/2473637-211738.html

Last week Merrill Lynch was traded at $31.

At that price Temasek would have suffered a loss of $17 a share - or a total loss of about US$1.48b for the 87mil shares.

Despite massive write-downs and capital injection, Merrill Lynch's outlook remains uncertain, reports Bloomberg.

The company's equity capital position is weak relative to competitors, said Brad Hintz, a New York-based analyst at Sanford C Bernstein, reports Ambereen Choudhury.

"With $19.9b in CDOs still frozen on the balance sheet and with counterparty risk rising on the hedges underlying these troubled positions, the potential for additional material write-downs remains a concern,” Hintz said.

The New York-based firm's credit rating was cut last week by Moody's Investors Service to A2 from A1.

The third-biggest US securities firm probably will report a loss of $6.57 a share this year, compared with an earlier forecast of $1.07, Hintz said.

The revised estimate assumes the company generates no earnings in the second half.

Merrill may have to take an additional $10 billion of pre-tax write-downs related to its holdings of mortgage securities, Moody's estimates.

Huge paper losses

The disposal leaves Temasek Holdings and the Government Investment Corporation (GIC) still holding substantial parts of big troubled Western banks.

Its remaining investments in UBS (Switzerland), Citigroup, Barclays and Merrill Lynch - at an original cost of US$21.88b - have declined on by some 47 percent in value.

That is a paper loss of US$10.28b. However, Minister Mentor Lee Kuan Yew had said these investments were made as a long-term strategy of 30 years.

But as the Merrill Lynch sale shows, Temasek is not inflexible about cutting losses, if things threaten to get worse.

The political leadership has defended its investment of these sub-prime banks as “an opportunistic” foray that can happen once in a long while.

It believes these companies will survive the crisis and emerge stronger.

Some experts believe that Temasek has made an error of judgment.

Investment guru Jim Rogers said in July he believed that US bank stocks could fall further and predicted that Singapore's state investors would lose money on Citigroup and Merrill Lynch.

"I'm shorting investment banks on Wall Street," the successful investor said. "It grieves me to see what Singapore is doing. They are going to lose money."

At the Nomura Dialogue recently, Minister Mentor Lee Kuan Yew reported to investment mistakes, but that no one had benefited from it.

Singaporeans who want to see greater transparency in the government’s investments in troubled companies are unhappy with this vague answer to a serious problem.

One writer said, “Should we just move on? I do not think so. The patently huge mistake is not merely the result of recklessness but rather a systemic lack of accountability in making some of our largest investments.

“Let it be clear, the harm is terminally done. The entire reserves system must be re-examined and audited.”

Said slohand, "I saw the interview on TV last night and felt shortchanged.

"He brushed aside the issues with the logic that since the officers who made the decisions were not the beneficiaries in any sense of the word, such lapses are mistakes and are therefore acceptable...

"..The size indicates that it can only come from the very top."

The skies are dark but the storm has not broke yet.
By Seah Chiang Nee

SingaporeTyrannosaur SG

from todayonline:

http://www.todayonline.com/articles/267205.asp

With Merrill shares now selling at a huge discount to the US$48 ($65) apiece that Temasek paid last year, this would have meant a massive loss of some US$1.48 billion at Thursday’s close of US$31 a share.

Dismissing the rumours, Temasek’s managing director for corporate affairs said: “Temasek does not comment on speculation from dubious sources.” Warning investors against trading on such rumours, she added: “Investors and interested public are advised to refer only to official sources of information for announcements on major transactions.”

Some feel that Temasek had overpaid for these investments in a weak equities market. They appear to have a case as these investments, including Merrill, have declined by some 47 per cent in value.

SingaporeTyrannosaur SG

Originally posted by Panache1976:

Don't be misled by people who have never done any investments. Paper losses are still losses. To say otherwise is self-delusion. To put the losses in perspective:

10,000,000,000 divide by 3,000,000 (Singapore citizens) = $3,333 per citizen

That is the cost of bad judgement.

SingaporeTyrannosaur SG

(RTTNews) - The Singapore stock market on Friday halted the three-day losing streak that cost it more than 40 points or 1.5 percent while sending the market to a fresh 22-month closing low. Now the Straits Times Index is tipped to head back to the downside on Monday, possibly handing back support at 2,700 points that it regained last week.

lionnoisy SG

Oz defaulting rate is very low in first world standard.

The biggest debt collector in Oz said the reality may be 4 times higher.1

However,oz also get the

A.securitaization and

B .sub prime lending,in oz called non--conforming loan .

In Oz,all loans once secuitized,are removed out of balance sheet.

So,it is intersting to note the very low rate of defaulting.

This may be the reality.But it is also achieved by

hidden in securitization.

US--the older is the loan,the lower defaulting rate.

u can compare prime and sub prime defaulting rates in US and Oz.

NON-conforming = sub prime in US

above--This show Oz also get Full document and low document

and sub prime lending,which in Oz is officially called

NON CONFORMING mortgage.Low document mean short

of document to prove income.

above--Securitisation of mortgage in OZ is A$220 billion in early 2008.

2.This show Oz get Off-balance sheet assets or liability!!

different mortgage rates for mortgages of different risk .

NON conforming = US sub prime

this show there are OFF balance assets and liability.

mbia.com and ambac.com in poor shape in US.

@@@@@@@@@@@@@@@@@@@@@

The A$12.9 trillion off the balance sheet obligations in Oz banks

is the real problems.The Oz BANKS may win a lot or lose a lot.

Have the few big US investment banks pulled down by off the balance

oiligations and the COUNTER PARTS RISKS?

Eg the insurers, who suppose to compensate you when your trading

counterpart cannot fullfil his obligations,also cannot pay,like AIG!!

This is also COUNTER PART RISKD.

....

1. http://www.theaustralian.news.com.au/story/0,20867,21739387-2702,00.html

lionnoisy SG

12 small retail banks in US already fell.

Few big investment banks in US fell---,Merrill,Lenman,and Bears B.

Oz also adopts same biz model,but may be in a smaller scale,

in GDP %.

http://www.sgforums.com/forums/10/topics/331012

This is no suprise we hear the above news.

http://www.asx.com.au/asx/research/CompanyInfoSearchResults.jsp?searchBy=asxCode&allinfo=on&asxCode=BNB#chart

Banks on balance sheet assets

$2.2 T .

http://www.rba.gov.au/PublicationsAndResearch/FinancialStabilityReview/Mar2008/Html/list_of_tables.html#table_2

maurizio13 SG

I am appalled by your concern for Australia, seems like you are more interested in Australian issues than Singaporean issues. You can't better yourself as a person if you look outside for other's mistakes and make excuses for your own failure. To better yourself look at your own mistakes and improve on them. Perhaps this advice will give you a new impetus to look at yourself from a new perspective. Take yourself for example, through the years of posting, you still have not made any improvement in your English. A result of your looking for others mistake to put the blame on, thereby elevating yourself.

Don't worry much, I am sure the Australian Banks will do fine if they have the support of the government. ST Telemedia bought over 100% of Global Crossing in 2003, it has been making USD 300 million losses every year, yet it still managed to survive till today. So don't underestimate the prowess of government financing.

http://www.sgforums.com/forums/10/topics/235957

http://investors.globalcrossing.com/

lionnoisy SG

Net foreign debts and many info

$600 billion

http://www.rba.gov.au/Statistics/AlphaListing/alpha_listing_f.html

u can know every things about oz housing,finances,monetary

,reserves here:

http://www.rba.gov.au/PublicationsAndResearch/

The Reserve Bank issues a Statement on Monetary Policy four times a year. These Statements assess current economic conditions and the prospects for inflation and output growth. A listing of these statements/reports is available under Reserve Bank Bulletin.

A monthly publication that contains economic commentary, feature articles, speeches and a set of statistical tables.

The Reserve Bank issues a Financial Stability Review half-yearly. These Reviews assess the current condition of the financial system and potential risks to financial stability, and survey policy developments designed to improve financial stability.

maurizio13 SG

All the better that the Australian Bank fails, then alot of Singaporeans can afford to emigrate there and grab up all their housing.

Hooray!!!

We Hail Australia!!!

We Love Australia!!!