BofA's (BAC) Massive Risk Shift Plan Puts Depositors on Alert
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Bank of America (NYSE: BAC) shares are trading stronger Friday, following reports it plans a massive shift of risk.
According to the NYPost Friday, BofA is looking to move about $55 trillion -- yes, trillion -- of Merrill Lynch-owned derivatives into its retail banking unit. The retail unit already houses trillions in assets, all insured by the FDIC.
Oh yeah, and depositors also keep funds in the retail unit, putting an additional, massive amount of risk to their holdings. How much of the $55 trillion do you think the FDIC is currently capable of insuring without substantial write downs?
BofA may be making the move in the wake of recent downgrades, and could aid BofA in having to put up less collateral to its derivative counterparties, reports said.
Officials at BofA said the move was requested by counterparties, and should be viewed upon as "problematic" for the bank.
The FDIC, for its part, was irked when only informed about the move last week. It is currently reviewing the move and will make data available to the Federal Reserve next week.
Finally, the NYPost notes that the transfer has increased tensions between the FDIC and Fed, with the Fed accusing the FDIC of leaking BofA's moves to media outlets.
BofA shares are up 1.2 percent Friday morning.
Link to NY Post Article
According to the NYPost Friday, BofA is looking to move about $55 trillion -- yes, trillion -- of Merrill Lynch-owned derivatives into its retail banking unit. The retail unit already houses trillions in assets, all insured by the FDIC.
Oh yeah, and depositors also keep funds in the retail unit, putting an additional, massive amount of risk to their holdings. How much of the $55 trillion do you think the FDIC is currently capable of insuring without substantial write downs?
BofA may be making the move in the wake of recent downgrades, and could aid BofA in having to put up less collateral to its derivative counterparties, reports said.
Officials at BofA said the move was requested by counterparties, and should be viewed upon as "problematic" for the bank.
The FDIC, for its part, was irked when only informed about the move last week. It is currently reviewing the move and will make data available to the Federal Reserve next week.
Finally, the NYPost notes that the transfer has increased tensions between the FDIC and Fed, with the Fed accusing the FDIC of leaking BofA's moves to media outlets.
BofA shares are up 1.2 percent Friday morning.
Link to NY Post Article
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