財經觀察 1503 --- Sweden faces first big bank collapse

Sweden faces first big bank collapse

 
By Robert Anderson, Nordic Correspondent


Published: November 10 2008 16:38 | Last updated: November 10 2008 18:51
Carnegie, the Nordic region’s oldest and largest investment bank, was taken over by the Swedish government on Monday after its licence was revoked for failures in its internal controls.

Carnegie is the first Swedish bank to collapse in the current global financial crisis and the first to be taken over since the country’s banking crisis of the early 1990s. It is now likely to be broken up and sold.

“The decision has been taken in order to protect the financial stability and to preserve the value of the collateral,” the National Debt Office said in a statement on Monday.

Carnegie has been under investigation by the Swedish FSA over its internal management and controls, particularly concerning large credit exposures. Finansinspektionen sent a letter to Carnegie two weeks ago, questioning whether it was operating under the terms of its licence and requesting further information.

Carnegie made a loss of SKr362m ($46m) in the third quarter after making a SKr1bn provision for a problem loan. Carnegie made the provision because it wrote down to zero the value of unlisted property company shares given as collateral.

“Carnegie has taken exceptional risks for a long time by lending large amounts to one individual client,” the FSA said on Monday. “Exposing operations to such great risks in this way is a violation of the law. Carnegie has also broken the law by not notifying Finansinspektionen regarding this individual credit granting.”

The FSA has been investigating Carnegie since a trading scandal last year, after which the regulator gave Carnegie a record fine and ordered the replacement of its entire board because of the failure of its internal controls.

Carnegie took a SKr1bn loan facility from the Swedish central bank last month after it suffered a liquidity crisis. It increased the facility to SKr5bn after the announcement of the FSA investigation sent its share price into freefall.

The National Debt Office has now taken over the central bank loan, secured with the bank’s shares as collateral. The FSA has also restored Carnegie’s licence, improving the chance of attracting potential bidders.

Carnegie had already appointed Goldman Sachs to examine strategic possibilities, including a potential sale. Max Matthiessen, the group’s asset management subsidiary, is seen as particularly attractive.

Carnegie’s largest shareholder is Moderna Finance, the Swedish insurer formerly known as Invik, that is in turn owned by Milestone, an Icelandic financial company controlled by Karl and Steingrimur Wernersson.

Moderna Finance has recently reduced its stake in Carnegie from 17.6 per cent to around 10 per cent. Milestone owned a 5 per cent stake in Glitnir Bank, the Icelandic bank taken over by the government, the move that precipitated the island’s financial crisis.

Copyright The Financial Times Limited 2008

Father figure of mortgage securitisation dies. No flowers.

By Sam Jones, 10 Nov 2008

Actually Lewie Ranieri isn't dead. But the bank he formed when he left Salomon Brothers, Franklin Bank Corp, is:

Franklin Bank, S.S.B., Houston, Texas, was closed today by the Texas Department of Savings and Mortgage Lending, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Prosperity Bank, El Campo, Texas, to assume all of the deposits, including those that exceeded the insurance limit, of Franklin Bank.

As of September 30, 2008, Franklin Bank had total assets of $5.1 billion and total deposits of $3.7 billion. Prosperity Bank agreed to assume all the deposits, including the brokered deposits, for a premium of 1.7 percent. In addition to assuming all of the failed bank's deposits, Prosperity Bank will purchase approximately $850 million of assets. The FDIC will retain the remaining assets for later disposition.

Ranieri was the man behind the first ever mortgage securitisation - in 1977.

He was more than just the progenitor of MBS though. Ranieri created not just one series of bonds but the entire MBS market. The Salomon team he headed ("the fat guys") lobbied around the country; they had laws changed everywhere to recognise MBS as legal investments; they sold securitisation to the great bond houses of the USA.

Ranieri also said that "mortgages are math" - a dictum that has taken thirty years to come full circle.

The FDIC's bank failure list in full is available here.
http://www.fdic.gov/bank/individual/failed/banklist.html