| ▲ | JumpCrisscross 5 hours ago |
| Yeah, I'm going down a bit of a rabbit hole this morning. Turns out Wells Fargo's $59.7bn of private-credit lending is equal to 44% of its CE Tier 1 capital [1]. Meanwhile, Deutsche Bank got back to being Deutsche Bank while I was not looking [2]. [1] https://www.sec.gov/Archives/edgar/data/72971/00000729712500... [2] https://www.reuters.com/business/finance/deutsche-bank-highl... |
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| ▲ | lumost 4 hours ago | parent | next [-] |
| With the current concentration of wealth and banking, it almost seems like there is an incentive for banks to ruin themselves when they end up in a little trouble. If the bank has trouble, shareholders/executives lose - if the banking system has trouble... then QE will solve the bank trouble. |
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| ▲ | JumpCrisscross 4 hours ago | parent | next [-] | | > If the bank has trouble, shareholders/executives lose - if the banking system has trouble... then QE will solve the bank trouble It's a game of chicken, though. The folks at Lehman and SVB didn't cash out. JPMorgan did. (Both times. Actually, all of the times since 1907.) | |
| ▲ | sciencesama 4 hours ago | parent | prev [-] | | When can qe start ? |
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| ▲ | RobRivera 5 hours ago | parent | prev | next [-] |
| Deutsche gonna Deutsche. Recruitment tables should just have a banner that reads 'we've already spent your bonus on legal fees, here's some chocolate' |
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| ▲ | JumpCrisscross 4 hours ago | parent [-] | | I'm re-running some of the Fed's stress tests and, somehow, still find myself flabbergasted that DB is at the top of my risk list. Despite only having $12bn of exposure, if they see a 60% loss on that risk alone (assuming 60% recovery and 1.5x leverage), they breach their 4.5% capital requirement. That's the lowest threshold I'm finding across all of the banks the Fed stress tests. Now 50% loss means wipe out. But given the size of the portfolio, there is also the concentration risk. A single private-credit firm going bust shouldn't take out a bank. But that seems–seems!–to be what I'm seeing. | | |
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| ▲ | r_lee 3 hours ago | parent | prev [-] |
| Are you saying that they're using their private-credit portfolio as a Tier 1 capitalization to meet their regulatory demands (not sure if the ~10-15 something% rule has come back yet?) Been a bit out of the finance game |
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| ▲ | JumpCrisscross 3 hours ago | parent [-] | | > they're using their private-credit portfolio as a Tier 1 capitalization Banks' private-credit lending constitutes part of their risk-weighted assets. So yes, it's part of their CET1 [1], which is part of Tier 1 capital, and since it's equity measured it incorporates fucking everything. 4.5% is the U.S. minimum. Regulators start throwing their toys out of the pram when a bank breaches 7%. To be clear, I'm not seeing anyone in the near future breaching those limits. Deutsche Bank, the stupidest of the lot, seems to have let DB USA stuff most of the risk in its German AG. [1] https://www.investopedia.com/terms/c/common-equity-tier-1-ce... |
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