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The big 3 banks in Malaya, ie. Singapore's DBS bank, Kuala Lumpur's CIMB bank, Maybank has big derivative exposure as it is big FEE BASED business.|
Normally the TREASURY SECTION of such banks would buy and sell hedges, derivative products to generate fee, with what seems to be NO RISK.
However starting with the Lehman Brothers debacle, banks in the Amerikan Regime, European Union and British Club are begining to declare bankruptcy, get nationalized and the derivative products declared DEFAULTED.
The cost is normally the ownership of the banks which gets nationalized and the entire CAPITALIZED ASSETs lost. (Banks are limited by capital, so lost is limited) while bank's deposit are guaranteed backed by the loans, total npl would be unknown.
I was expecting "bad stories" to appear in Korea, Thailand, Indonesia, and maybe Malaya.
What surprises me was SINGAPORE is also affected.
DBS bank has S$1.0 trillion of derivative trades..
CIMB bank has M$220 billion of derivative trades.
Maybank has M$110 billion of derivative trades.
with defaults of so many European, Britiish, Amerikan banks....likely DBS, CIMB, Maybank are now exposed directly to risk.
THE SOLUTION, is limited to their capital, as the Amerikan, European example, declare insolvent, guarantee the savings and nationalized or takeover by other private banks. (unlikely in a crisis situation unless there are deep pocketed banks untouched by the US$55 trillion derivative trade, which normally is not very liquid now)
Malaya and Singapore will be affected but it's controllable.
However there are political repercussions.
Let's watch "BANK OK DANGEROUS" code. November will be interesting to watch.