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Shadow Banking Perspective from ALM Treasury Stéphane Denise Group ALM Deputy Head

Shadow Banking Perspective from ALM Treasury Stéphane Denise Group ALM Deputy Head. Tuesday 15th May 2012. What is Asset and Liability Management (ALM). Asset and Liability Management is, with Treasury, the ‘bank within the bank’ for liquidity risk management

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Shadow Banking Perspective from ALM Treasury Stéphane Denise Group ALM Deputy Head

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  1. Shadow BankingPerspective from ALM TreasuryStéphane DeniseGroup ALM Deputy Head Tuesday 15th May 2012

  2. What is Asset and Liability Management (ALM) • Asset and Liability Management is, with Treasury, the ‘bank within the bank’ for liquidity risk management • All liquidity demands and supplies from business lines are centralized to ALM Treasury through transfer mechanisms, including the cost of liquidity. Transfers are executed either analytically when within the same legal entity and with actual transactions when between different legal entity (branch, subsidiary…) • ALM Treasury is in charge of managing the liquidity risk of the Group that results from imbalances from internal (business lines’) demands and supplies which are subject to limits. This is done through actual funding transactions: secured / unsecured, public / private… *The Clearing House: 2 November 2011

  3. Agenda A US retail bank perspective A Group funding perspective A few remarks on Shadow Banking

  4. Bank of the West Treasuryis located in Walnut Creek

  5. Walnut Creek

  6. A US retail bank Assets Liabilities Investment Securities 8.5 9.2 Demand Deposits Real Estate Loans 11.0 2.3 Checking Installment Loans 10.8 1.8 Savings Small Business Loans 2.1 8.0 Money Market Commercial Loans 8.1 7.5 CDs Income Property Loans 6.9 8.5 Wholesale CDs Construction Loans 2.3 6.3 Money Market Borrowings 10.0 FHLB Advances Other Loans 1.9 Leases 2.8 0.2 Notes Reserve -0.5 0.7 Non Costing Liabilities Non Earning Assets 9.4 8.8 Equity Total 63.3 63.3 Total *The Clearing House: 2 November 2011

  7. US Agencies • Fannie Mae (3Q.11): mortgages = $2.9tn(http://www.fanniemae.com/ir/pdf/earnings/2011/q32011.pdf) • Freddie Mac (3Q.11): mortgages = $1.8tn(http://www.freddiemac.com/investors/er/pdf/10q_3q11.pdf) • Ginnie Mae (3Q.11): guaranteed securities = $1.6tn(http://www.sifma.org/research/statistics.aspx) • FHLB (3Q.11): advances + mortgages = $0.4tn(http://www.fhlb-of.com/ofweb_userWeb/resources/11Q3end.pdf) • This sums to $6.7tn • This represents 46% of US GDP ($14.6tn) and 50% of US Mortgages ($13.5tn) that are financed by US Agencies, explicitely or implicitely guaranteed by US Government (http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm)

  8. Agenda A US retail bank perspective A Group funding perspective A few remarks on Shadow Banking

  9. Offer different investment instruments to fund the activities • The need for ‘one issuer’ in a Group and the conflict with diversification requirements from investors • Funding instruments diversification that could be qualified as ‘shadow banking’: • Securitization • Covered Bonds • Repos • ABCP Conduits • Manage both the encumbrance and the cannibalisation issues *The Clearing House: 2 November 2011

  10. Agenda A US retail bank perspective A Group wide perspective A few remarks on Shadow Banking

  11. Shadow Banking helps solving issues • Demand for diversification • Demand for “low risk” assets • Should Central banks be considered shadow banks? • Address global macroeconomic imbalances • Pensions financing and ageing populations • Mark-to-market pro-cyclicity *The Clearing House: 2 November 2011

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