Tag Archives: Derivatives

Credit Suisse : Sells Credit Derivatives Portfolio to Citigroup

Citigroup Inc. bought a multibillion-dollar book of credit derivatives from Credit Suisse Group AG during the second quarter of this year, in another sign of European banks unloading risk.

Switzerland’s Credit Suisse disclosed the sale of a portfolio comprising around 54,000 credit derivative trades in its second quarter results on July 28. The book was sold to Citigroup, according to a person familiar with the matter. Bloomberg reported Citigroup’s purchase earlier on Friday.

A spokesperson for Citigroup Inc. declined to comment.

The move comes amid a broad shift in investment banking, with many European banks scaling back capital-intensive trading businesses and better capitalized U.S. lenders often stepping in to buy them.

J.P. Morgan Chase & Co. also showed interest in buying the Credit Suisse book, according to two people familiar with the matter.

For Credit Suisse, the sale was part of a broader reshaping of its business as the bank looks to dial back on volatile investment banking and boost wealth management.

Read on.

Deutsche Bank’s Chief Economist Calls For €150 Billion Bailout Of European Banks

I knew that Deutsche Bank was financially in trouble…And derivatives will always be a major problems for all global banks…

The cards have been tipped, and it appears Italy’s Prime Minister may have been right.

In the aftermath of Brexit, much of the investing public’s attention has turned to Italian banks which are in desperate need of a bailout as a result of €360 billion in bad loans growing worse by the day (and not a bail-in, as European regulations mandate, as that would lead to an immediate bank run) to avoid a freeze and/or collapse of Italy’s banking sector. This has pushed stock prices – and default risk – on Italian banks to record levels. So far Italy’s bailout requests have mostly fallen on deaf ears, as Germany’s political leaders have resisted Renzi’s recurring pleas for a taxpayer funded rescue. However, as we have alleged, and as the Italian Prime Minister admitted last week, the core risk for Europe is not just the Italian banking sector but the biggest bank of all in Europe: Deutsche Bank.

Recall last Thursday, when speaking at a joint news conference with Swedish Prime Minister Stefan Lofven, Matteo Renzi said other European banks had much bigger problems than their Italian counterparts.

“If this non-performing loan problem is worth one, the question of derivatives at other banks, at big banks, is worth one hundred. This is the ratio: one to one hundred,” Renzi said.

He was, of course, referring to the tens of trillions of derivatives on Deutsche Bank’s books.

Read on.

Warren, Warner, Cummings Introduce Legislation to Improve Federal Oversight of Risky Derivatives Trading and to Protect Taxpayers

Sen. Warren have endorsed Hillary Clinton for President and joined her on the campaign trail recently, but, she continues her fights for tough Wall Street reform.

JUN 29, 2016

Fact Sheet
Bill Text

Washington, DC – Today, United States Senators Elizabeth Warren (D-Mass.) and Mark Warner (D-Va.), and Congressman Elijah Cummings (D-Md.), Ranking Member of the House Committee on Oversight and Government Reform, introduced the Derivatives Oversight and Taxpayer Protection Act to strengthen federal oversight of the multi-trillion dollar derivatives market and to ensure that big financial firms – not taxpayers – are on the hook for derivatives losses.  The Financial Crisis Inquiry Commission found that derivatives were at the center of the storm in the 2008 financial crisis.  A glaring lack of federal oversight of derivatives allowed firms to build up massive levels of leverage and risk, setting the stage for the crisis and forcing taxpayers to spend hundreds of billions of dollars on bailouts.

The Dodd-Frank Act sought to fix these problems, but thanks in part to Republican obstruction in Congress and weak rules from the Commodity Futures Trading Commission (CFTC), much more needs to be done to oversee derivatives, close up loopholes in existing rules, and force private firms to bear the full risk of their derivative positions.

“The only way to make sure that derivatives can never lead to a financial crisis and taxpayer bailouts again is to put in place clearer rules and stronger oversight,”Senator Warren said. “Otherwise, big financial firms will be able to rake in billions when things go well, then come back to taxpayers with their hands out when things come crashing down.  That might be just fine for Republicans and their allies on Wall Street, but Democrats are standing together to make sure that never happens again.”

“Reckless derivatives trading at AIG helped precipitate the global financial crisis of 2008 and usher in the Great Recession.  That is why Congress required stricter capital, margin, and clearing requirements for derivatives activities in Dodd-Frank.  This bill builds on our financial reform efforts by improving transparency, closing gaps in regulatory oversight, and giving CFTC resources adequate to accomplish these goals,” said Senator Warner, Ranking Member of the Senate Banking Subcommittee on Securities, Insurance & Investment.

Read more from Senator Warren website. Click here.

BofA, Citi, Others Hit With Singapore Rate-Rigging Suit

Law360, New York (July 1, 2016, 11:00 PM ET) — Citibank NA, Bank of America and dozens of other financial institutions were hit with a putative class action in New York federal court Friday by investors alleging a “massive conspiracy” to rig the prices of financial derivatives linked to Singapore’s benchmark interest rates.

The suit filed Friday by FrontPoint Asian Event Driven Fund and Sonterra Capital Master Fund stems from an investigation by the Monetary Authority of Singapore that found that 133 traders at 20 banks around the globe had attempted to manipulate submissions used to…

Source: Law360

Sen. Ron Wyden Targets Derivatives To Tackle Tax Evasion

Law360, New York (May 18, 2016, 11:04 PM ET) — Sen. Ron Wyden, D-Ore., on Wednesday released a proposal aimed at simplifying how derivatives are taxed by requiring ordinary income treatment for all derivative contracts in order to cut down on the use of complicated financial tools to avoid paying taxes.

The Senate Finance Committee ranking member said the discussion draft of the Modernization of Derivatives Tax Act would level the playing field for average taxpayers and lay the groundwork for reform by repealing nine tax code sections and wiping out hundreds of pages of regulations….

Source: Law360

UBS, 5 Other Banks Ink $100M Muni Derivatives Deal

Law360, New York (February 24, 2016, 12:54 PM ET) — Six investment banks, including UBS AG, Societe Generale SA and Natixis Funding Corp., agreed to pay more than $100 million to settle private class action claims they fixed prices and rigged bids for municipal derivatives, signalling a potential end to multidistrict litigation in the area, according to a Wednesday court filing.

Under the proposed settlement, UBS will pay the largest portion, at $32 million, followed by Natixis, which has agreed to shell out more than $28.4 million. Societe Generale will pay $25.4 million. Other settling firms…

Source: Law360

The Disappearing Derivatives … Mystery Solved?

With everything going on with Wall Street you may have missed a Reuters article by Charles Levinson that talked of hundreds of billions of dollars of trades by U.S. banks which went missing early last year.
Has the mystery of these disappearing derivatives been solved? Well, maybe.
It seems the trades had not really disappeared, they’d just been resettled, so to speak, thanks to a loophole that had been handed down in 2013 by the Commodity Futures Trading Commission( CFTC). Thanks to the changing of a few key words in swaps contracts, that loophole allowed for trades to be shifted to Europe where the regulations governing trades are by far more lenient than in the U.S., and largely outside of many of the restrictions mandated by Dodd-Frank.
This loophole impacted some of the most widely traded financial derivatives in the world – incidentally, some of the same instruments that helped bring down the economy in 2008 and which eventually led to government bailouts of the big banks  involved in this roulette game.

Big banks accused of interest rate-swap fixing in U.S. class action suit

NEW YORK (IFR/Reuters) – A class action lawsuit, filed Wednesday, accuses 10 of Wall Street’s biggest banks and two trading platforms of conspiring to limit competition in the $320 trillion market for interest rate swaps.

The class action lawsuit, filed in U.S. District Court in Manhattan, accuses Goldman Sachs Group, Bank of America Merrill Lynch, JPMorgan Chase, Citigroup, Credit Suisse Group, Barclays Plc, BNP Paribas SA, UBS, Deutsche Bank AG, and the Royal Bank of Scotland of colluding to prevent the trading of interest rate swaps on electronic exchanges, like the ones on which stocks are traded.

As a result, the lawsuit alleges, banks have successfully prevented new competition from non-banks in the lucrative market for dealing interest rate swaps, the world’s most commonly traded derivative.

The banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the lawsuit alleged.

Read on.

Wall Street Said to Win Lucrative Concession in Derivatives Rule

  • U.S. banks could cut billions on costs if swaps rule eased
  • Regulators may complete final version of rule next month

Wall Street is close to cutting billions of dollars from the cost of a derivatives rule as a debate among regulators over how tough the
provision should be shifts in banks’ favor.

Firms such as JPMorgan Chase & Co. and Morgan Stanley wouldn’t have to set aside as much money in trades between their own divisions in the final version of a rule U.S. regulators may release as soon as next month, said two people familiar with the discussions. After months of disagreement, the agencies, which include the Federal Deposit Insurance Corp. and Federal Reserve, decided to ease the demands of an earlier version of the proposal, according to the people.

The industry had fought the mandate that both a bank and an affiliate put up collateral, which was laid out in the version of the rule that was proposed last September and had strong support from the FDIC. In a compromise, banking regulators now agree that the final measure should only demand collateral from an affiliate trading with a U.S. bank unit, said the people, who requested anonymity because the rule hasn’t been released publicly.

Read on.

JPMorgan Looks To Sink Derivative Suit Over $2B In Fines

Law360, Wilmington (March 10, 2015, 10:45 PM ET) — JPMorgan Chase & Co. urged a Delaware Chancery judge Tuesday to toss a shareholder derivative suit accusing its officers and directors of overseeing faulty money laundering and sanctions controls that led to more than $2 billion in fines, saying similar complaints have already been dealt with by other courts.

At a hearing in Wilmington, counsel for JPMorgan and its top brass told Vice Chancellor Donald F. Parsons Jr. that the current complaint brought by the city of Providence, Rhode Island, should be dismissed because similar derivative…

Source: Law360