Post by Sapphire Capital on Apr 13, 2009 12:03:16 GMT 4
An administrative hold is only taking advantage of a gray area in Basel II, when funds are
committed beyond one year the amount is added to the capital and allows credit volume
without reserve requirement, the same applies for Gold and treasuries of the banks
jurisdiction and treasuries from G7 countries, or such instruments which are backed by
them. In an administrative hold the period is stated as a term but not as a commitment,
so it is a loose binding and the bank moves it in reserve based accounting into the
capital base which allows then a bank credit arrangement towards the arbitrage flip
following the reserve ratio of its supervision terms, in actuality the bank does front the
arbitration flip risk cover, and for that passes on the risk premium; since the leverage
is usually between 10 to 100 depending on the bank and jurisdiction the result is a
relatively high volume through a daily settled cpd account which afterwards, meaning the
next day, disappears,and is reestablished in different numbering and so on. The basis of
the transaction is a defacto over letter commitment allowing the bank players the
issueance of debt instruments which retire in themselves and the actual flip amount can be used off government balance sheet, since we are talking about commitments for a 30 year term, which are not monetized when issued. This arrangement is only possible when dealing with top performance banks which are accepted internationally and have Patriot Act Certification, which more or less means a money center bank.
committed beyond one year the amount is added to the capital and allows credit volume
without reserve requirement, the same applies for Gold and treasuries of the banks
jurisdiction and treasuries from G7 countries, or such instruments which are backed by
them. In an administrative hold the period is stated as a term but not as a commitment,
so it is a loose binding and the bank moves it in reserve based accounting into the
capital base which allows then a bank credit arrangement towards the arbitrage flip
following the reserve ratio of its supervision terms, in actuality the bank does front the
arbitration flip risk cover, and for that passes on the risk premium; since the leverage
is usually between 10 to 100 depending on the bank and jurisdiction the result is a
relatively high volume through a daily settled cpd account which afterwards, meaning the
next day, disappears,and is reestablished in different numbering and so on. The basis of
the transaction is a defacto over letter commitment allowing the bank players the
issueance of debt instruments which retire in themselves and the actual flip amount can be used off government balance sheet, since we are talking about commitments for a 30 year term, which are not monetized when issued. This arrangement is only possible when dealing with top performance banks which are accepted internationally and have Patriot Act Certification, which more or less means a money center bank.