The Impact of the Credit Crisis on Nordic Counterparties. Nordic Capital Markets Forum Peter B Nowell. 26 February 2008. Contents. Section 1 Distribution of US sub-prime RMBS 03 Risk retention in CDOs of ABS 04 Leveraged funds 05 Section 2 European Credit Spreads 06
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Nordic Capital Markets Forum
Peter B Nowell
26 February 2008
Distribution of US sub-prime RMBS 03
Risk retention in CDOs of ABS 04
Leveraged funds 05
European Credit Spreads 06
UK Banks / Spanish banks 07
Norwegian municipalities 08
Liquidity portfolios 09 Nordic securitisation 10
Restructuring SIVs 11
Pricing credit, liquidity and volatility 12
. . .
Hybrid CDO of ABS
“The turmoil in the international capital markets throughout the third and fourth quarter of 2007 has been challenging to Eksportfinans and led to unrealized losses in Eksportfinans’ liquidity portfolio.
The portfolio consists of highly rated bonds with strong creditworthiness. The losses in the liquidity portfolio are likely to be reversed gradually, based on the bonds’ maturity. However, the unrealized losses do affect Eksportfinans’ results for 2007. Eksportfinans is not exposed to mortgage loans or sub-prime loans in the United States .
Due to the situation in the international capital markets, the Group experienced a loss of NOK 149 million for the year 2007 compared to a profit of NOK 159 million in 2006. Profit excluding unrealized gains and losses on financial instruments amounted to NOK 294 million in 2007, compared to NOK 243 million in 2006.
In December 2007, Eksportfinans announced an issuance of NOK 1.2 billion in new share capital from existing owners....”
“SBAB’s liquidity portfolio is a liquidity reserve intended to manage liquidity and refinancing risk. SBAB has liquidity reserves that correspond to liquidity requirements for 30 days or more. The liquidity portfolio has no exposure to the US residential mortgage market or to sub-prime loans in any other market. The portfolio amounted to SEK 31.0 billion as per 31 December 2007. The bonds in the portfolio can be pledged at the Riksbank or the European Central Bank. SBAB values each security individually at market value and reports the change in value in the income statement. Consequently, the unrealised change in market value affects the net operating income. The change in market value as per 31 December 2007 amounted to SEK -616 million and is a result of the financial turbulence that affected the credit market during the second half of 2007.”