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Articles 1 - 11 of 11
Full-Text Articles in Corporate Finance
Ireland And Iceland In Crisis C: Iceland’S Landsbanki Icesave, Arwin G. Zeissler, Thomas Piontek, Andrew Metrick
Ireland And Iceland In Crisis C: Iceland’S Landsbanki Icesave, Arwin G. Zeissler, Thomas Piontek, Andrew Metrick
Journal of Financial Crises
At year-end 2005, almost all of the total assets of Iceland’s banking system were concentrated in just three banks (Glitnir, Kaupthing, and Landsbanki). These banks were criticized by certain financial analysts in early 2006 for being overly dependent on wholesale funding, much of it short-term, that could easily disappear if creditors’ confidence in these banks faltered for any reason. Landsbanki, followed later by Kaupthing and then Glitnir, responded to this criticism and replaced part of their wholesale funding by using online accounts to gather deposits from individuals across Europe. In Landsbanki’s case, these new deposits were marketed under the name …
Ireland And Iceland In Crisis B: Decreasing Loan Loss Provisions In Ireland, Arwin G. Zeissler, Andrew Metrick
Ireland And Iceland In Crisis B: Decreasing Loan Loss Provisions In Ireland, Arwin G. Zeissler, Andrew Metrick
Journal of Financial Crises
All public companies in the European Union, including Ireland’s major banks, were required to adopt IAS 39 for their annual accounting periods beginning on or after January 1, 2005. Under the “incurred loss” model of IAS 39, banks could set aside reserves for loan losses only when objective evidence existed that a loan was impaired, not in anticipation of future losses. As a result, Irish banks saw their aggregate reserve for bad loans drop from 1.2% of loan balances at the end of 2000 to only 0.4% by 2006-07, just before the collapse of the banking industry caused loan losses …
Jpmorgan Chase London Whale H: Cross-Border Regulation, Arwin G. Zeissler, Andrew Metrick
Jpmorgan Chase London Whale H: Cross-Border Regulation, Arwin G. Zeissler, Andrew Metrick
Journal of Financial Crises
As a global financial service provider, JPMorgan Chase (JPM) is supervised by banking regulatory agencies in different countries. Bruno Iksil, the derivatives trader primarily responsible for the $6 billion trading loss in 2012, was based in JPM’s London office. This office was regulated both by the Office of the Comptroller of the Currency (OCC) of the United States (US) and by the Financial Services Authority (FSA), which served as the sole regulator of all financial services in the United Kingdom (UK). Banking regulators in the US and the UK have entered into agreements with one another to define basic parameters …
Jpmorgan Chase London Whale G: Hedging Versus Proprietary Trading, Arwin G. Zeissler, Andrew Metrick
Jpmorgan Chase London Whale G: Hedging Versus Proprietary Trading, Arwin G. Zeissler, Andrew Metrick
Journal of Financial Crises
In December 2013, the primary United States financial regulatory agencies jointly adopted final rules to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is often referred to as the “Volcker Rule”. Section 619 prohibits banks from engaging in activities considered to be particularly risky, including proprietary trading and owning hedge funds or private equity funds. Banking regulators designed the final rule against proprietary trading in part to prevent losses like the $6 billion London Whale loss that took place in 2012 at JPMorgan Chase. Given the controversial nature of the Volcker Rule, it is …
Jpmorgan Chase London Whale F: Required Securities Disclosures, Arwin G. Zeissler, Giulio Girardi, Andrew Metrick
Jpmorgan Chase London Whale F: Required Securities Disclosures, Arwin G. Zeissler, Giulio Girardi, Andrew Metrick
Journal of Financial Crises
On April 13, 2012, JPMorgan Chase (JPM) Chief Financial Officer Douglas Braunstein took part in a conference call to discuss the bank’s first quarter 2012 earnings. Coming just a week after media reports first questioned the risks taken by JPM derivatives trader Bruno Iksil, Braunstein made a series of assertions about the trades. On May 10, JPM finalized its first quarter financial results, which included some disclosures regarding Iksil’s trading that were substantially different from Braunstein’s statements of April 13. At issue is whether the regulatory filings on April 13 and May 10, as well as verbal comments by Braunstein …
Jpmorgan Chase London Whale E: Supervisory Oversight, Arwin G. Zeissler, Andrew Metrick
Jpmorgan Chase London Whale E: Supervisory Oversight, Arwin G. Zeissler, Andrew Metrick
Journal of Financial Crises
As a diversified financial service provider and the largest United States bank holding company, JPMorgan Chase (JPM) is supervised by multiple regulatory agencies. JPM’s commercial bank subsidiaries hold a national charter and therefore are regulated by the Office of the Comptroller of the Currency (OCC). Since the bank’s Chief Investment Office (CIO) invested the surplus deposits of JPM’s commercial bank units, the OCC was also CIO’s primary regulator. During the critical period from late January through March 2012, when CIO traders undertook the failed derivatives strategy that ultimately cost the bank $6 billion, JPM did not provide the OCC with …
Jpmorgan Chase London Whale D: Risk-Management Practices, Arwin G. Zeissler, Andrew Metrick
Jpmorgan Chase London Whale D: Risk-Management Practices, Arwin G. Zeissler, Andrew Metrick
Journal of Financial Crises
JPMorgan Chase (JPM) prided itself on having the best risk-management practices in the financial industry, having survived the 2007-09 financial crisis in better shape than many competitors. Chief Executive Officer Jamie Dimon often spoke of the bank’s “fortress balance sheet.” A keen focus on risk management is vital to JPM’s longevity, as is the case with all highly leveraged financial institutions. However, the JPM Task Force that investigated the $6 billion 2012 London Whale trading loss concluded that risk-management practices at the bank’s Chief Investment Office (CIO), the unit in which the loss occurred, were given less scrutiny by senior …
Jpmorgan Chase London Whale C: Risk Limits, Metrics, And Models, Arwin G. Zeissler, Andrew Metrick
Jpmorgan Chase London Whale C: Risk Limits, Metrics, And Models, Arwin G. Zeissler, Andrew Metrick
Journal of Financial Crises
Value at Risk (VaR) is one of the most commonly used ways to measure and monitor market risk. At JPMorgan Chase (JPM), very large derivative positions established by Bruno Iksil in the Synthetic Credit Portfolio (SCP) caused the bank’s Chief Investment Office (CIO) to exceed its VaR limit for four days in a row in January 2012. In response, the CIO changed to a new VaR model on January 30, which appeared to immediately reduce VaR by half. However, JPM soon discovered that this new VaR model had not been properly implemented and the bank went back to using the …
Lessons Learned: Thomas C. Baxter, Jr., Esq., Alec Buchholtz, Rosalind Z. Wiggins
Lessons Learned: Thomas C. Baxter, Jr., Esq., Alec Buchholtz, Rosalind Z. Wiggins
Journal of Financial Crises
Baxter, who was General Counsel of the Federal Reserve Bank of New York during the crisis, gives us his take on how best to prepare for future crises.
The Lehman Brothers Bankruptcy H: The Global Contagion, Rosalind Z. Wiggins, Andrew Metrick
The Lehman Brothers Bankruptcy H: The Global Contagion, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
When Lehman Brothers filed for bankruptcy on September 15, 2008, it was the largest such filing in U.S. history and a huge shock to the world’s financial markets, which were already stressed from the deflated housing bubble and questions about subprime mortgages. Lehman was the fourth-largest U.S. investment bank with assets of $639 billion and its operations spread across the globe. Lehman’s clients and counterparties began to disclose millions of dollars of potential losses as they accounted for their exposures. But the impact of Lehman’s demise was felt well beyond its counterparties. Concern regarding its real estate assets, its large …
The Lehman Brothers Bankruptcy C: Managing The Balance Sheet Through The Use Of Repo 105, Rosalind Z. Wiggins, Andrew Metrick
The Lehman Brothers Bankruptcy C: Managing The Balance Sheet Through The Use Of Repo 105, Rosalind Z. Wiggins, Andrew Metrick
Journal of Financial Crises
The Lehman Brothers court-appointed bankruptcy examiner produced a 2,200-page report detailing possible claims that the estate might pursue. The most surprising revelation of the report was that during its last year Lehman had relied heavily on an unusual financing transaction—Repo 105. The examiner concluded that Lehman’s aggressive use of Repo 105 transactions enabled it to remove up to $50 billion of assets from its balance sheet at quarter-end and to manipulate its leverage ratio so that it could report more favorable results. This case considers in-depth Lehman’s questionable use of Repo 105 transactions and its impact.