Too Big to Fail or too big? Top 5 Banks Hold 95.7%, Or $221 Trillion of Derivatives

xmaspoo · Mar 27, 2012

TBTF Get TBTFer: Top 5 Banks Hold 95.7%, Or $221 Trillion, Of Outstanding Derivatives | ZeroHedge

Every quarter the Office of the Currency Comptroller releases its report on Bank Derivative Activities, and every quarter we find that the Too Big To Fail get Too Bigger To Fail. To wit: in Q4 2011, of the total $230.8 trillion in US outstanding derivatives, the Top 5 banks (JPM, BofA, Morgan Stanley, Goldman and HSBC) accounted for 95.7% of all Derivatives. In some respects this is good news: in Q2, the Top 5 banks held 95.9% of the $250 trillion in derivatives. Unfortunately it is also bad news, because $220 trillion is more than enough for the world to collapse in a daisy chained failure of bilateral netting (which not even all the central banks in the world can offset).

What is the worst news, is that the just released report indicates that in addition to everything else, we have now hit peak delusion, as banks now report to the OCC that a record high 92.2% of gross credit exposure is "bilaterally netted." While we won't spend much time on this issue now, it is safe to say that bilateral netting is the biggest lie in modern finance (read How US Banks Are Lying About Their European Exposure; Or How Bilateral Netting Ends With A Bang, Not A Whimper for an explanation of this fraud which was exposed completely in the AIG collapse). And just to put this in global perspective, according to the BIS in the first half of 2011, global derivative gross exposure increased by $107 trillion to a record $707 trillion.

It will be quite interesting to get the full year report to see if this acceleration in gross exposure has increased. Because if it has, we will now know that in 2011 European banks were forced up to load up on several hundred trillion in mostly interest rate swap exposure. Which can only mean one thing: when and if central banks lose control of government bond curves, an rates start moving wider again, the global margin call will be unprecedented. Until then we can just delude ourselves that central planners have everything under control, have everything under control, have everything under control.
Top 5 bank derivative exposure:
Click to expand...

(Larger Pictures in Link)

Exposure by bank:

And the delusion that everyone is somehow hedged. To the tune of $230 trillion!

Source: OCC

See what happens when you bail out banks? They straighten up and fly right, why of course! Certainly they won't partake in more risky endeavors then their previous ones, granted that they don't have to pick up the tab when the losses come due.

This is why we must remain vigilant and stand ready to provide more capital to banks, when need be.

LSYouTiger · Mar 27, 2012

Who is more powerful: Obama or Bernanke...

Central banks are bad. A bank should nt be allowed to loan more than it has in assets. Why can that type of law get passed

xmaspoo · Mar 27, 2012

[ame=http://www.youtube.com/watch?v=wTWKT3pZgT8]Financial Oligarchy and the New Robber Barons w/Derivatives Guru Janet Tavakoli - YouTube[/ame]

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Too Big to Fail or too big? Top 5 Banks Hold 95.7%, Or $221 Trillion of Derivatives

xmaspoo Bronze member
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LSYouTiger THC...nom.nom.nom

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Too Big to Fail or too big? Top 5 Banks Hold 95.7%, Or $221 Trillion of Derivatives

xmaspoo Bronze member Gold Member

LSYouTiger THC...nom.nom.nom

xmaspoo Bronze member Gold Member

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