From Wall Street On Parade

Gimme Shelter

December 5 2022 of last year researchers for the Bank for International Settlement (Claudio Borio, Robert McCauley and Patrick McGuire) released an astonishing report that found that foreign banks had secret derivative debt that is “10 times their capital.”

The report focused on the amount of derivative debt that was not being captured through regular statistical reporting because it is held off the banks’ balance sheets. The researchers refer to this exposure as “staggering” and note the potential for upsets to dollar swap lines to settle it as it comes due.

The report raises further alarm bells with this: “For banks headquartered outside the United States, dollar debt from these instruments is estimated at $39 trillion, more than double their on-balance sheet dollar debt and more than 10 times their capital.” Their on-balance sheet dollar debt is $15 trillion.

The most recent quarterly derivatives report from the U.S. regulator of national banks, the Office of the Comptroller of the Currency (OCC), found that as of September 30, 2022 four U.S. mega banks held 88.6 percent of all notional amounts of derivatives in the U.S. banking system. The total notional amount for all banks was $195 trillion. JPMorgan Chase held $54.3 trillion of that; Goldman Sachs held $50.97 trillion; Citigroup’s Citibank held $46 trillion; and Bank of America held $21.6 trillion. Even though the Dodd-Frank legislation required that most of these derivative trades move to central clearing, as of September 30, 2022 the OCC report found that 58.3 percent of these derivatives were not being centrally-cleared, meaning they were over-the-counter (OTC) private contracts between counterparties, thus adding another layer of opacity to an unaccountable system.

https://ko-fi.com/thejournaloflingeringsanity