Europe's largest bank, HSBC Holdings, said on Monday it would bail out its two structured investment vehicles (SIVs) by taking US$45 billion in assets onto its balance sheet.
The move was an attempt to repair investor confidence and create a long-term solution for assets that have become difficult to value or sell since problems with subprime mortgages in the US sent jitters through the global credit markets.
SWAPS
HSBC said in a statement on Monday that investors in the two SIVs -- Cullinan Finance and Asscher Finance -- would be able to swap their holdings for debt issued by a new company backed by HSBC loans.
The bank said that it did not expect the move to have a material impact on its earnings or capital strength.
FUND
Three institutions -- Bank of America, Citigroup and JPMorgan Chase -- are working to set up a US$75 billion fund to stabilize the SIVs, which use short-term financing to buy higher-yielding and longer-term debt and are among the biggest buyers of pools of mortgages and other complex, asset-backed securities.
The bailout means HSBC will not participate in the larger SIV fund, a bank spokesman said. Instead, HSBC expects its action to "set a benchmark and restore a degree of confidence to the SIV sector, while providing a specific solution to address the challenges faced by investors in Cullinan and Asscher," Stuart Gulliver, HSBC chief executive of corporate and investment banking, said in the statement.
The step could prompt other banks to seek similar solutions, some analysts said.
CONCERNS
While HSBC may have found a way to bolster investor confidence in its SIVs, some bank executives were still concerned about additional write-downs, especially after HSBC said earlier this month that losses in the housing market were spreading to credit card and other consumer loans, forcing it to set aside US$3.4 billion, more than it had forecast four months earlier.
HSBC may have to set aside an additional US$12 billion for bad debts, Roy Ramos and other Goldman Sachs analysts wrote in a note, lowering their recommendation for the stock to sell, from neutral.
NO HUMAN ERROR: After the incident, the Coast Guard Administration said it would obtain uncrewed aerial vehicles and vessels to boost its detection capacity Authorities would improve border control to prevent unlawful entry into Taiwan’s waters and safeguard national security, the Mainland Affairs Council (MAC) said yesterday after a Chinese man reached the nation’s coast on an inflatable boat, saying he “defected to freedom.” The man was found on a rubber boat when he was about to set foot on Taiwan at the estuary of Houkeng River (後坑溪) near Taiping Borough (太平) in New Taipei City’s Linkou District (林口), authorities said. The Coast Guard Administration’s (CGA) northern branch said it received a report at 6:30am yesterday morning from the New Taipei City Fire Department about a
IN BEIJING’S FAVOR: A China Coast Guard spokesperson said that the Chinese maritime police would continue to carry out law enforcement activities in waters it claims The Philippines withdrew its coast guard vessel from a South China Sea shoal that has recently been at the center of tensions with Beijing. BRP Teresa Magbanua “was compelled to return to port” from Sabina Shoal (Xianbin Shoal, 仙濱暗沙) due to bad weather, depleted supplies and the need to evacuate personnel requiring medical care, the Philippine Coast Guard (PCG) spokesman Jay Tarriela said yesterday in a post on X. The Philippine vessel “will be in tiptop shape to resume her mission” after it has been resupplied and repaired, Philippine Executive Secretary Lucas Bersamin, who heads the nation’s maritime council, said
REGIONAL STABILITY: Taipei thanked the Biden administration for authorizing its 16th sale of military goods and services to uphold Taiwan’s defense and safety The US Department of State has approved the sale of US$228 million of military goods and services to Taiwan, the US Department of Defense said on Monday. The state department “made a determination approving a possible Foreign Military Sale” to the Taipei Economic and Cultural Representative Office in the US for “return, repair and reshipment of spare parts and related equipment,” the defense department’s Defense Security Cooperation Agency said in a news release. Taiwan had requested the purchase of items and services which include the “return, repair and reshipment of classified and unclassified spare parts for aircraft and related equipment; US Government
More than 500 people on Saturday marched in New York in support of Taiwan’s entry to the UN, significantly more people than previous years. The march, coinciding with the ongoing 79th session of the UN General Assembly, comes close on the heels of growing international discourse regarding the meaning of UN Resolution 2758. Resolution 2758, adopted by the UN General Assembly in 1971, recognizes the People’s Republic of China (PRC) as the “only lawful representative of China.” It resulted in the Republic of China (ROC) losing its seat at the UN to the PRC. Taiwan has since been excluded from