Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Cross Border Financial Positions and Exposures Juan Pablo Graf Banco de México 1 I. Introduction Information Gaps (Authorities) Foreign Sectors Banks Non Banks Domestic Sectors Banks Other Financial Entities Listed Corporations Non - Listed Corporations Households 2 I. Introduction Information Gaps (Publicly disclosed) Foreign Sectors Banks Non Banks Domestic Sectors Banks Other Financial Entities Listed Corporations Non - Listed Corporations Households 3 I. Introduction The majority of systemically-important banks are foreignowned Market Share % BBVA-BANCOMER 23.5 CITIBANK-BANAMEX 21.2 SANTANDER-SERFIN 14.4 BANORTE 11.1 HSBC 9.5 INBURSA 4.0 SCOTIABANK-INVERLAT 3.2 Other subsidiaries of foreign banks (14) 4.6 Other Banks (21) 8.4 4 II. Exposures of financial corporations Foreign Sectors Banks Non Banks Detailed daily information: Domestic Sectors • Securities and Derivatives Banks Detailed daily information on: • Loans & Deposits • Securities (incl. Repos) • Credits and Deposits (No individual counterpart ID) Monthly Information • Corporate credit • Derivatives • Swaps Financial Entities • Forwards (Brokerage Houses, Insurance Co., Pension Funds) • Options • FX transactions Detailed daily information: • Securities and Derivatives • Credits and Deposits (No individual counterpart ID) 5 II. Exposures of financial corporations Subsidiaries and Parent Banks •Financial regulation limits the exposure that domestic banks may have to related counterparties (i.e. individuals, firms and any financial entity owned by the same shareholders). •For domestic banks, which are subsidiaries of foreign financial groups, the limits apply to any exposure to parent banks and their foreign subsidiaries (e.g., London, Cayman) •As of 2008: •The limit applies to all financial exposures (i.e., loans, deposits, securities, repos, the net exposure arising from derivative transactions; and settlement risk in forex exposures) •The limit was reduced to 50% of Tier 1 capital. 6 II. Exposures of financial corporations Subsidiaries and Parent Banks • Some subsidiaries increased their lending to their parent banks significantly. These positions have been closely monitored. However, this information is not made public. 7 II. Exposures of 1 Information financial corporations gaps Detailed data collected by central bank allowed a prompt assessment of financial entities exposures to “toxic” assets This information was very useful to assess early the level of exposure. This information was not made public. 8 III. Exposures of non-financial corporations • • Type of exposure: • Derivatives OTC • Debt with banks and other FIs • Debt through securities issued abroad Information sources: • Creditor data BIS-type data Timeliness (work-in-progress) Central bank survey Granularity ? (maturity,counterparties currencies) • • Debtor data Listed corporates (see next) Non-listed Credit registry ? ? 9 IV. OTC Derivatives • Non-financial corporations in emerging market economies reported large losses due to FX OTC derivatives Exchange Rate Domestic Currency / USD 15 days moving avg. 160 150 130 120 110 100 90 80 Jan Jul Apr 2008 Source: Banco de México In millions of US dollars, October 2008. Firms Mexico Comercial Mexicana GRUMA CEMEX ALFA VITRO Grupo Posadas Brazil Sadia Aracruz Grupo Votorantim Mexico Brazil Korea 140 Estimated losses from derivatives operations Oct Jan 2009 South Korea 500 small and Taesan LCD Losses Some financial institutions reported as counterparties $2,200 $804 $711 $250 $293 $50 Merrill Lynch, JP Morgan, Barclays, Goldman Sachs, Credit Suisse, Deustche Bank AG and Citibank London (through Banamex, the Citibank's Mexican subsidiary) $2,400 $2,130 $967 Citigroup Inc., Merrill Lynch & Co., Barclays Plc, Banco UBS Pactual SA, Banco Itau Holding Financeira and Deustche Bank. $1,000 $220 Kookmin Bank (biggest korean bank), Shinhan Bank, Industrial Bank of Korea (small/medium size lender), Citibank Korea Inc. and SC First Bank Korea Ltd. Source: Quarterly reports for Mexican firms; Bloomberg and Reuters for firms in other countries. 10 IV. OTC Derivatives • Host authorities do not have timely and detailed information about derivative operations between foreign banks and other FIs domestic non-financial firms • Financial counterparties (domestic and foreign) might not have information about firms’ derivatives operations with other counterparties • Foreign financial counterparties of domestic firms do not have information about firms’ credit history • Complexity of products 11 IV. OTC Derivatives • Regulatory responses (May 2009) Securities Markets Regulation(Periodical reporting - Quarterly) Market-to-market positions / Underlyings / Notional amounts Detailed payment conditions Contingency analysis Financial Information Rules (Financial Statement Disclosure Rules) Risks involved (detailed analysis) Hedging structure of every derivatives position (including “off- balance sheet” transactions) Collaterals Valuation techniques Levels of exposure 12 V. Non-listed non financial corporations and households Domestic Sectors Foreign Sectors • Non-listed Corporations Households Banks Non Banks BIS-type Aggregate statistics No information (If regulated or listed home supervisors may have some information) Creditor data • Timeliness, granularity of disclosures (maturity, counterparties, currency) • Households: debt or equity 13 V. Non-listed non financial corporations and households Investments in foreign funds “through” an institution in Mexico (“low profile soliciting”, e.g. Stanford) Domestic authorities have no power over such investments. • Response to “Madoff and Stanford” cases: stress the importance of investors verifying that institutions are authorized to take deposits or investments. • Irregular deposit taking and low-profile soliciting will continue, thus information gaps for domestic authorities remain. • Cooperation among international authorities may mitigate the information gaps and greatly contribute to understanding risks borne domestically from investments in foreign funds. 14