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They allowed banks to engage in a large expansion of lending and off-balance sheet credit last autumn to reverse an economic slowdown.
With respect to large, systemically important banks, they over-relied on credit rating agencies and turned a willfully blind eye to risk that was offset in theory but not in reality, such as the risk built up in off-balance sheet credit vehicles or risk hedged by undercapitalised counterparties.
The analysis starts with the special characteristics of the project company, proceeds in Section 7.2 with the overview of the contractual structure of the deal (due diligence report, term sheet, credit agreement, security documents, equity contribution agreement, intercreditors' agreement, hedging agreement, project documents).
For several years, legendary investor Jim Rogers has expressed his concern to me about JPMorgan's balance sheet, credit card division and his belief that Blythe Masters, the head of JPMorgan's commodities area, knows so little about commodities.
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The precise details matter less than the growing eagerness of coalition insiders to tweak Plan A.The markets also want growthFretful loyalists worry that the chancellor currently prefers "clever wheezes" to nudge the private sector into spending, involving off-balance-sheet credit guarantees and the like.
While banks have stepped in with their superior balance sheets, credit ratings and trading skills to fill the liquidity void left by Enron, the latest ramp-up in trading has also been marked by an air of secrecy underscored by the proliferation of hundreds of hedge funds that are speculating on everything from crude oil to electricity in both regulated and unregulated markets.
The government's strong counter-cyclical fiscal and monetary stimulus ran into mostly state-owned banks whose ability to respond with on-balance-sheet credit was constrained, given caps on their lending volumes and ratios of loans to deposits.
This could negatively affect bank balance sheets, credit availability, and house prices.
The company was also worried about the effect a purchase would have on its balance sheet and credit rating.
It added that if Repsol ended up using the money to pay down debt rather than spending it or holding it on its balance sheet, a credit rating upgrade was likely.
Given the size in GDP terms of the accumulation of real estate risks in the balance sheet of credit institutions, the potential risks were systemic.
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