HSBC and its Questionable Assets

HSBC, the bank involved in funding terrorism, laundering Mexican drug cartel money, off balance sheet derivatives and now, questionable asset prices on its balance sheet. This bank is insolvent, beyond any shadow of a doubt and will require a bailout/in. When, I couldn’t say but it’s on the cards. These questionable acts are all rubber stamped by the big accounting firms and financial regulation arms of government. The fraud, using mark to fantasy instead of mark to market ensures 100% value of the assets when it’s lucky they are worth pennies of the pound. Courtesy of The Telegraph(who have now removed the link):

Forensic Asia on Tuesday began its coverage of Britain’s largest banking group with a ‘sell’ recommendation, warning the lender had between $63.6bn (£38.7bn) and $92.3bn of “questionable assets” on its balance sheet, ranging from loan loss reserves and accrued interest to deferred tax assets, defined benefit pension schemes and opaque Level 3 assets.

The broker’s note is written by two of its senior analysts, Thomas Monaco (a former senior bank examiner at the Federal Reserve Bank of New York) and Andrew Haskins (previously worked at HSBC for 15 years).

In the report, the analysts apply what they describe as a “moderate stress test” to the balance sheets of HSBC’s major subsidiaries.

Taking the analysis further, the report sets out the impact of incoming Basel III capital rules and says HSBC could be required at a minimum to raise close to $60bn in new capital by 2019 and potentially as much as $111bn.

“In our view, HSBC has not made the necessary adjustments, during the quantitative easing reprieve. Rather, it has allowed legacy problems to linger as new ones in emerging markets gather pace. The result has been extreme earnings overstatement, causing HSBC to become one of the largest practitioners of capital forebearance globally. This charade appears to be ending, given how few earnings levers remain besides selling off core elements of the franchise and the stringencies of Basel III compliance,” wrote Forensic Asia.

The broker adds: “While having stated capital ratios well above peer averages is all well and good, HSBC’s stated capital ratios would appear to be nothing more than a mirage if our analysis is correct.”

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