Borrowers turn lenders as banks tap firms for cash - News and Current Events | futures io social day trading
futures io futures trading

Borrowers turn lenders as banks tap firms for cash
Updated: Views / Replies:463 / 0
Created: by kbit Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors – all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you don’t need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Thread Tools Search this Thread

Borrowers turn lenders as banks tap firms for cash

  #1 (permalink)
Elite Member
Aurora, Il USA
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
kbit's Avatar
Posts: 5,884 since Nov 2010
Thanks: 3,303 given, 3,334 received

Borrowers turn lenders as banks tap firms for cash

(Reuters) - Blue-chip names like Johnson & Johnson (JNJ.N), Pfizer (PFE.N) and Peugeot (PEUP.PA) are among firms bailing out Europe's ailing banks in a reversal of the established roles of clients and lenders.

One source with knowledge of the so-called repo deals or short-term secured lending, said the two U.S. pharmaceutical groups and French carmaker were the latest to sign up for them.

Europe's banks are struggling to secure the cash to fund their day-to-day business and have largely stopped lending to each other for fear Europe's sovereign debt crisis could land any of their peers in trouble.

As a result a group of well-known, cash-rich companies with solid cash flows has stepped in the repo market, which provides a form of lending so far almost exclusively in use between banks, and between banks and central banks.
One market participant said in one key area of lending companies now accounted for 25 percent of these deals.

Repos provide the new financiers with the strict guarantees they need before parting with their cash, answering worries that the crisis has weakened Europe's banks to the extent that they might not be able to pay the money back.

"Companies in the past were ... happy to deposit cash on an unsecured basis to a bank for an interest payment," said Frank Reiss, who oversees some of the repo business at Euroclear, the Brussels-based settlement house owned by a group of banks.

"Now following the crisis, we have seen that companies are engaging in repos secured with collateral against the cash they are lending," said Reiss. Euroclear is the largest administrator of repo trades in Europe.
At the moment the European Central Bank provides the main lifeline for banks and has pumped hundreds of billions of euros of cash into the market.

But the banks are parking most of the money they borrow back at the ECB rather than trusting to lend to each other.
They are also paying insurers and pension funds to take their illiquid bonds in exchange for better quality ones, in a desperate bid to secure much-needed cash from the ECB, which only provides cash against collateral.

In stark contrast, Europe's biggest companies are sitting on cashpiles that amount to more than $20 billion each in the case of BP Plc (BP.L) and Volkswagen (VOWG_p.DE).

According to Moody's, a sample of European companies held $872 billion cash in total at the middle of 2011.
It is typically these very large companies, with reliable cash flows, that engage in repo deals with banks, Euroclear's Reiss said, though he declined to give the names of any counterparties, because of client confidentiality.

Corporate treasurers are typically extremely wary of talking about their day-to-day cash management, and Johnson & Johnson, Pfizer declined to discuss the matter. Peugeot was not available for comment, while other large companies contacted by Reuters also declined comment.

Regulators cracking down on "shadow banking" -- closed-door deals blamed in part for the 2008 financial crisis -- have expressed worries about how opaque the repo market is, and the U.S. Federal Reserve has set up a working group to suggest reforms.

The rise in repos means more business for companies such as Euroclear and its main rival Clearstream -- owned by Deutsche Boerse (DB1Gn.DE) -- as well as Bank of New York Mellon (BK.N), JP Morgan (JPM.N) and State Street (STT.N).

In a repo trade, one party buys collateral from the other, with the obligation to sell it back at a pre-defined later date and for a slightly lower price -- the so-called haircut. That way, the seller provides cash to the buyer.
When companies rather than banks engage in repo deals they typically rely on a third party for administering the collateral, in what are known as triparty repos.

The triparty market grew at 22.3 percent in the first half of last year, a survey by the International Capital Market Association (ICMA) showed, versus only a modest rise in the overall business, further prove that companies are increasingly accessing the market.

"It shows you that triparty is growing, but ... not the banks themselves," said Richard Comotto, an academic who is involved in drawing up the survey. "I would say triparty is very growing strongly among corporate treasurers."

The European repo market was worth 6.2 trillion euros ($7.88 trillion) in the first half of 2011, according to ICMA's September survey. The vast majority of business conducted was between banks, and banks and central banks.
Other than the ICMA survey, few numbers are available.

Based on his daily practice, Euroclear's Reiss estimated that up to 25 percent of the triparty market was on behalf of companies, a massive and sudden rise from the 2 to 5 percent where it had traditionally been.

Exclusive: Borrowers turn lenders as banks tap firms for cash | Reuters

Reply With Quote


futures io > > > > Borrowers turn lenders as banks tap firms for cash

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Upcoming Webinars and Events (4:30PM ET unless noted)

Wyckoff Hunting for Great Risk/Reward Ratio w/Gary Fullett

Elite only

Digging into the Details of iSystems w/Stage 5 & iSystems

Jun 5

Similar Threads
Thread Thread Starter Forum Replies Last Post
Cash-Rich Firms Sit Tight, Fearing Government Meddling Quick Summary News and Current Events 0 November 8th, 2011 12:00 AM
5 Central Banks Move to Supply Cash to Europe kbit News and Current Events 0 September 16th, 2011 05:09 PM
Firms Have Record $800 Billion Of Cash But Still Won't Hire Quick Summary News and Current Events 0 June 22nd, 2011 06:50 PM
Lack of Credit Leads Some Borrowers to Controversial Payday Lenders Quick Summary News and Current Events 0 January 13th, 2011 11:30 AM
Foreclosure Relief: Good for Banks, Not So for Borrowers Quick Summary News and Current Events 0 August 28th, 2010 10:20 AM

All times are GMT -4. The time now is 06:30 PM.

Copyright © 2018 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432,
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2018-05-23 in 0.09 seconds with 19 queries on phoenix via your IP