Seven years ago, Risky Finance highlighted how Basel III internal model disclosures revealed banks’ thinking about the risk of securities financing.Now, losses at hedge fund Situational Awareness are prompting renewed regulatory scrutiny of bank repo lending. We examine what’s changed.
In March 2019 we reported that JPMorgan had cut its securities financing exposure by $130 billion. The move appeared in no SEC filing and was reported by no news organisation: it sat in the bank’s FFIEC 101 return to the Federal Financial Institutions Examination Council, which is where banks on the advanced approaches report what their internal models actually say.
The Risky Finance bank database has since been revamped and the securities financing series rebuilt from source. On the revised figures the reduction was $152.2 billion, between the fourth quarter of 2017 and the second quarter of 2018.
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