Reuters reports that concerns are growing that some of the large investment banks are still not coming out and revealing their potential exposure to SIVs (structured investment vehicles) which have invested in US subprime lending-related assets. And this lack of transparency, it seems, is not helping the market.
The Financial Times reports that Jean-Pierre Mustier, the boss over at SG Corporate & Investment Bank, has described the behaviour of the credit market in August as 'irrational'. He said that he felt confident that the markets would begin to function again soon, and that appetite for credit risk would return to 2004 levels.
The Wall Street Journal reports that Deutsche Bank CEO Josef Ackermann confirmed Tuesday that the bank had been impacted from the recent credit crunch in the markets, but said that Deutsche's exposure to hedge funds were 'fully collateralized and (that) margin calls are being met'. According to the newsaper, the bank has said that its total assets in asset-backed commercial paper conduits was around $43.6bn. The bank also said that there were signs that the market is stabilizing.
As we move into September, we can probably look forward to another difficult month in the equity markets. CNBC reports that since 1929, US stocks have declined an average of 1.29% during September, compared with an average gain of 0.59% during all other months of the year.
Topping off not a particularly good week for BarCap, the firm is now to inject $1.6bn to rescue a structured investment vehicle it help set-up last year.
The Financial Times reports that Edward Cahill, the former head of European collateralised debt obligations over at BarCap, was not pressured to resign by the firm and that he returned to the office after a holiday this week to help ensure that there was 'an orderly transition of responsibilities'. A spokesperson for the firm said that 'there had been no red flags or compliance issues' raised in the run up to Cahill's resignation.
The Financial Times reports that investment banks are now likely to cut 10-15% of their staff 'across the board', as the turmoil in the financial markets takes its toll on firm profits. Rating agency Standard & Poor's came out last week and said that the aggregate profits of the five biggest investment banks could fall by as much as 70% in the second half of the year from the first.
The Financial Times reports that Royal Bank of Scotland (RBS) has shed five staff in its US structured finance operations (25% of the total) in the wake of the subprime crisis.
A new survey released earlier this week by the US Institute for Policy Studies and United For A Fair Economy reveals that the top US private-equity bosses and hedge fund managers earn more in 10 minutes than the average US worker makes in a year.