As U.S. banks manage the casualties of devastated credit markets, international financial institutions continue to feel the pain. Given the current state of the markets, the implementation of an accounting rule that impacts as much as $10 trillion in asset-backed securities was delayed for at least a year.
At a July 30 meeting, the Financial Accounting Standards Board said it approved the delay of the implementation of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and FASB Interpretation No. 46, Consolidation of Variable Interest Entities, until Nov. 15, 2009. The move affects qualified special purpose entities.
Republican Rep. Spencer Bachus applauded the delay, noting that all market participants need an opportunity to comment. He also suggested that any changes should be made “preferably when markets are functioning with minimal stress and volatility.” In a letter to FASB before the board made its decision, he said around $7.2 trillion in mortgage-backed securities, $2.5 trillion in asset-backed securities and $0.8 trillion in asset-backed commercial paper as of Dec. 31, 2007, could be impacted by the proposed change.
“Changes to securitization accounting could have a dramatic impact on the economy, the capital markets and consumers seeking credit,” Bachus explained in the letter. “With capital and liquidity at a premium, the effect of these changes could be to prolong market dislocation.”
In a statement supporting FASB’s delay, the Mortgage Bankers Association said, “Consolidation of securitization QSPE is likely to swell the balance sheets of the affected entities, adversely impact financial ratios, financial covenant performance and regulatory capital tests; and bring a new chill to credit markets at the exact time when all market participants are working to relieve the current credit crunch.”
HSBC Holdings plc reported (U.S.) $2.9 billion in losses from it North American operations during the first half of 2008, including a $2.2 billion loss from it U.S. consumer finance business — formerly known as Household International. Loan impairment charges of $6.8 billion were 85 percent higher than a year earlier but 15 percent better than the second half 2007.
“The U.S. remains a difficult market, with rising unemployment and falling house prices, and we have recognized this with an impairment charge of $527 million on the goodwill of our North American personal financial services businesses at group level,” London-based HSBC said.
HSBC’s consumer lending branch network was cut to 900 branches from 1,000 during the first half, while is mortgage portfolio fell to $31.4 billion from $36.2 billion.
Deutsche Bank reported a (U.S.) $1.0 billion second-quarter profit, down from a $2.8 billion profit a year earlier. Earnings reflected $3.6 billion in mark-downs on predominantly Alt-A RMBS, monoline insurers, commercial real estate, leveraged finance loans and loan commitments, and other positions.
The NASDAQ Stock Market notified Franklin Bank Corp. on July 23 that its common stock had not maintained the minimum bid price of $1 per share during the prior 30 days required for continued listing, an announcement last week said. The Houston-based company said it has until Jan. 20, 2009, to get back in compliance.
SunTrust Banks Inc. announced Friday that it acquired approximately $225 million in deposits of First Priority Bank of Bradenton, Fla., from the Federal Deposit Insurance Corporation. The acquisition includes six former First Priority branches and 50 employees. The bank was shut down by the commissioner of the Florida Office of Financial Regulation.
IndyMac Bancorp Inc., which saw its principle operating subsidiary IndyMac Bank F.S.B. taken over by banking regulators last month, said in a Securities and Exchange Commission filing last week that it intends to file voluntary petition for chapter 7 Bankruptcy.
