Derivatives: A Banking Time Bomb Waiting to Go Off
from SeekingAlpha.com: Home Page by Graham Summers
I’ve been warning about the Trillion Dollar Ticking Time Bomb of derivatives for months now. As a brief recap, let’s consider the following:
1. The current notional value of derivatives on US commercial banks’ balance sheets is $203 trillion.
2. 97% of these ($196 trillion) sit on FIVE banks’ balance sheets (more on this shortly)
3. If even 1% of this $203 trillion is “at risk” … you’re talking about $2 TRILLION in at risk bets made in the derivatives market
4. If 10% of that 1% end badly, you’re talking about $200 billion in losses
Total equity at the five banks is $737 billion. So, if you assume that only 1% of derivatives are “at risk” (odds are it’s more) and 10% of that at risk money is lost, you’ve wiped out nearly 1/3 of the banks’ equity.
http://seekingalpha.com/article/169859-der...off?source=feed
Full Version: Derivatives: A Banking Time Bomb Waiting to Go Off
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QUOTE(Snuffysmith @ Oct 29 2009, 06:56 PM) 
Derivatives: A Banking Time Bomb Waiting to Go Off
from SeekingAlpha.com: Home Page by Graham Summers
I’ve been warning about the Trillion Dollar Ticking Time Bomb of derivatives for months now. As a brief recap, let’s consider the following:
1. The current notional value of derivatives on US commercial banks’ balance sheets is $203 trillion.
2. 97% of these ($196 trillion) sit on FIVE banks’ balance sheets (more on this shortly)
3. If even 1% of this $203 trillion is “at risk” … you’re talking about $2 TRILLION in at risk bets made in the derivatives market
4. If 10% of that 1% end badly, you’re talking about $200 billion in losses
Total equity at the five banks is $737 billion. So, if you assume that only 1% of derivatives are “at risk” (odds are it’s more) and 10% of that at risk money is lost, you’ve wiped out nearly 1/3 of the banks’ equity.
http://seekingalpha.com/article/169859-der...off?source=feed
from SeekingAlpha.com: Home Page by Graham Summers
I’ve been warning about the Trillion Dollar Ticking Time Bomb of derivatives for months now. As a brief recap, let’s consider the following:
1. The current notional value of derivatives on US commercial banks’ balance sheets is $203 trillion.
2. 97% of these ($196 trillion) sit on FIVE banks’ balance sheets (more on this shortly)
3. If even 1% of this $203 trillion is “at risk” … you’re talking about $2 TRILLION in at risk bets made in the derivatives market
4. If 10% of that 1% end badly, you’re talking about $200 billion in losses
Total equity at the five banks is $737 billion. So, if you assume that only 1% of derivatives are “at risk” (odds are it’s more) and 10% of that at risk money is lost, you’ve wiped out nearly 1/3 of the banks’ equity.
http://seekingalpha.com/article/169859-der...off?source=feed
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