anz counter party write down alert part 2, page-3

Ocker the bank wont disclose their counterparty disclosure all we can assume is that ANZ has exposure because they have admitted their participation in the CDO/CDS market and there are so only so many counterparties in this market to go around. We dont know the level where the bank needs to bring provisions either because the formula is not just worked out on the insurer it includes the bond in question as well.

We only effectively find out these answers when ANZ declares (or doesnt) a provision.

With Lehman teetering on the edge this entire area could accelerate very quickly with cascading credit rating downgrades.

This is the real point a banks debt outlook could change overnight based on a fragile daisy chain of counterparties, ANZ (and yes the problem exists for the other banks as well) could find itself significantly revising its profit outlook overnight if further worsening in the global occurs

My ongoing point with respect to ANZ is that their risk management processes demonstrate systemic weakness to detect and protect them from individual business unit failure, the OPES to me is a just an example of how management failed to control risk, a single department seeking minor returns (in an overall bank context) has exposed the bank to substantial potential losses, the point is if this has been allowed to happen in several areas it suggests a supervisory risk management weakness across the entire bank.

How much quantum risk has the derivatives traders exposed ANZ to at a corporate level while chasing business unti returns?

Major counterparty failures in the derivatives market will answer that question. I suspect ANZ has failed to exercise control over these department , much like the OPES saga.

http://www.financialsense.com/editorials/engdahl/2008/0606.html


Fitchs ratings are as follows


Investment Grade

* AAA : the best quality companies, reliable and stable
* AA : quality companies, a bit higher risk than AAA
* A : economic situation can affect finance
* BBB : medium class companies, which are satisfactory at the moment

Non-Investment Grade (also known as junk bonds)

* BB : more prone to changes in the economy
* B : financial situation varies noticeably
* CCC : currently vulnerable and dependent on favorable economic conditions to meet its commitments
* CC : highly vulnerable, very speculative bonds
* C : highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations
* D : has defaulted on obligations and Fitch believes that it will generally default on most or all obligations