What did Lehman’s Eurosystem collateral turn out to be worth? February 25, 2013 at 10:07 am

From the Bundesbank:

Frankfurt-based Lehman Brothers Bankhaus AG settled its monetary policy transactions with the Eurosystem via the Bundesbank… In September 2008 … liabilities vis-à-vis the Bundesbank stood at €8.5 billion. These liabilities originated exclusively from monetary policy refinancing operations, for which LBB had pledged a total of 33 securities, chiefly highly complex instruments… Since autumn 2008 the Bundesbank has gradually resolved the pledged securities, in some cases having to restructure them. In 2012, Diversity and Excalibur*, the two largest positions in the LBB collateral portfolio, were sold, amongst other assets. The process of winding down the pledged securities is now complete.

The situation after more than four years of resolving collateral is as follows. With proceeds from sales as well as interest and redemption payments totalling €7.4 billion.

In other words, LBB’s collateral turned out to be worth 84 cents on the dollar, after accounting for haircuts; and it took four years to get that much.

*Diversity and Excalibur where European CMBS deals. See here and here for further details.

4 Responses to “What did Lehman’s Eurosystem collateral turn out to be worth?”

  1. […] Ex Macchiato: What did Lehman’s Eurosystem collateral turn out to be worth?: “LBB’s collateral turned out to be worth 84 cents on the dollar, after accounting for […]

  2. […] aware not just of the rubbish the web can produce, but also of how much incredibly high quality reporting and analysis is supplied by people who have gainful employment that doesn’t feature their […]

  3. Is this one reason why putting banks into conservatorship type arrangements could be useful – because marking to market can lead to overshooting asset valuations?

  4. Yes, exactly QM.