Posted on 01/16/2016 6:10:57 PM PST by Lorianne
Earlier this week, before first JPM and then Wells Fargo revealed that not all is well when it comes to bank energy loan exposure, a small Tulsa-based lender, BOK Financial, said that its fourth-quarter earnings would miss analysts’ expectations because its loan-loss provisions would be higher than expected as a result of a single unidentified energy-industry borrower.
We can now make it official, because moments ago we got confirmation from a second source who reports that according to an energy analyst who had recently met Houston funds to give his 1H16e update, one of his clients indicated that his firm was invited to a lunch attended by the Dallas Fed, which had previously instructed lenders to open up their entire loan books for Fed oversight; the Fed was shocked by with it had found in the non-public facing records. The lunch was also confirmed by employees at a reputable Swiss investment bank operating in Houston.
This is what took place: the Dallas Fed met with the banks a week ago and effectively suspended mark-to-market on energy debts and as a result no impairments are being written down. Furthermore, as we reported earlier this week, the Fed indicated "under the table" that banks were to work with the energy companies on delivering without a markdown on worry that a backstop, or bail-in, was needed after reviewing loan losses which would exceed the current tier 1 capital tranches.
In other words, the Fed has advised banks to cover up major energy-related losses.
(Excerpt) Read more at zerohedge.com ...
Not a good sign, but this same “mark-to-market” was what eveyone has said was particularly bad about Sarbanes-Oxley, if I properly recal, during the last big market crash.
Suspending it for now may not be a terrible thing.
it just seems like a desperate act now..people will run for the exits of banks and energycompanies
By the way, this sort of information from a Fed review is not supposed to be public knowledge. If leaked, it can cause fines for the governed entity.
If this is going on with state member banks, I wonder if the OCC and FDIC are on board for their banks, as well.
Transparency is what is required.
Sounds like a re-run of the mortgage crisis. Wonder if the banks will be “too big to fail” again.
My question, as well, however, FDIC banks are possibly held to a stronger requirement for a “mixed basket” than Fed and OCC banks.
The FDIC was making sure no bank had concentrations in any one market segment, unless it was clearly government-backed “safe.” Consequently, with bigger reserves and small portions of overall portfolios in specific industries, I don’t expect FDIC banks to have a real concern.
The Fed was always more lenient, probably because the FDIC is the entity that has to clean up their messes.
No, this is nowhere near that sort of concern.
I think it’s a good idea temporarily. On their financial dial statements it will indicate how it is valued, so shareholders and creditors should be aware.
The FDIC’s hands in Atlanta weren’t clean leading up to the 2008 crisis. Witness the high percentage of bank failures in that region.
Well, postponing the inevitable just increases the opportunities later.
The concentration concern came out of the crash.
The banks were at fault—not the FDIC.
yeah
When that was first introduced,those of us in banking said that marking to market, even on performing loans would cause huge swings in bank assets. A better solution would have been higher capital requirements and loan loss reserves. But Congress knows everything.
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