Steinhoff, the banks and the bezzle

2 March 2018/No Comments
By Nick Dunbar

If you lend against collateral, do you have a credit or market risk position? Both answers can be found in the way banks handled their $1.6 billion loans to the family trust of Christo Wiese, former chief executive of Steinhoff International, the troubled South African retailer.

Some banks (including Goldman, HSBC, Nomura and Bank of America) treated the loans as investment grade credit exposure. Even though the borrower was not Steinhoff itself, the shares in the company that collateralised the loan would have reduced the loss-given-default in the banks’ risk models.

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