Derivatives exposure still dogs banks

Discussion in 'Wall St. News' started by archon, Jul 11, 2008.

  1. archon


    Derivatives exposure still dogs banks
    Adele Ferguson | July 12, 2008

    NATIONAL Australia Bank's announcement yesterday that it was in discussions with ABN AMRO to buy its Australian and New Zealand operations, and that it might need to increase a $181 million provision, highlights the problems with Australia's continuous disclosure regime.

    Shareholders were made aware of these significant issues thanks to directors being so concerned about them that they felt they needed to disclose them as material before signing off on a prospectus underwriting agreement.

    The announcement basically says that a prospectus underwriting agreement has more onerous requirements and is taken more seriously by directors than the continuous disclosure regime.

    NAB's update on the outlook for its $US1.1 billion exposure to collateral debt obligations (CDOs), a fancy term for structured products that used bonds backed by mortgages and other consumer debt as their building blocks, sent shivers through the market as the spotlight again returned to the lack of transparency of the banks in off-balance-sheet exposures to derivatives.

    Shares were dumped and analysts started looking at the exposure of banks to CDOs.

    In a report yesterday, Wilson HTM analyst Brett Le Mesurier said he continued to view ANZ and NAB as having the riskiest credit risk profiles of the major banks.

    "ANZ and NAB have the largest and second largest exposures to credit derivative-related counterparties, respectively. NAB's total notional credit derivative exposure at September 30, 2007, was $24 billion...,,24006311-643,00.html?from=public_rss