The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

ECB reveals multi-billion euro repo exposure

Lehman Brothers and the failed Icelandic banks leave their mark.

ECB faces significant losses from exposure to defaulted banks

ECB faces significant losses from exposure to defaulted banks

The European Central Bank is facing large potential losses arising from exposure to €10.3 billion of assets left behind from defaulting bank counterparties to the euro system last autumn. In addition to Lehman Brothers, three Icelandic banks (Glitnir, Kaupthing and Landsbanki) and Dutch bank Indover have defaulted. Among the assets that the ECB has been left holding is a collateralized debt obligation containing deteriorating commercial real estate assets. The €2.17 billion note was the senior part of a two-tranche transaction structured by Lehman Brothers in the spring of 2008 – when the firm was desperate for liquidity – precisely for the purpose of gaining access to the central bank’s generous repo facility.

Despite being rated at single A, and that by only one agency – Standard & Poor’s – the CRE CDO still passed the ECB’s eligibility tests as acceptable repo collateral and the ECB advanced cash to Lehman against it. S&P has since downgraded the deal to BB+, citing the various key roles Lehman played in the transaction.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree