Monday, 26 November 2007

HSBC Shifts SIV's On Balance Sheet

It seems the good folk at HSBC couldn't wait for the super SIV to get up and running and so have decided to provide funding to their ailing SIV's. From

HSBC to provide $35 billion in funding to SIVs

HSBC Holdings on Monday said it would move two of its structured investment vehicles onto its balance sheet and provide up to $35 billion in funding, saying it doesn't expect a near-term resolution of the funding problems faced by the vehicles that it and other banks hold.

HSBC said it's moving Cullinan Finance and Asscher Finance, the two SIVs, onto its balance sheet to prevent a forced liquidation of what it called "high-quality assets."

The SIVs had funding through the end of the year, and the Asscher SIV was funded through April 2008, HSBC said. It's providing up to $35 billion in funding, and its balance sheet will expand by $45 billion.

But the banking giant insists earnings won't be materially impacted, because existing investors will continue to bear all economic risk from actual losses.

"We believe that HSBC's actions will set a benchmark and restore a degree of confidence to the SIV sector, while providing a specific solution to address the challenges faced by investors in Cullinan and Asscher, the two SIVs managed by HSBC," the bank said in a statement.

The last paragraph is a overstating the positive a little, if there were any confidence in the SIV sector someone would be willing to buy their paper and then HSBC wouldn't have to bring them back on balance sheet.

HSBC like Citigroup can afford to fund their SIV's but it still eats up capital that could be profitably put to use elsewhere and negatively effects their capital ratios.

HSBC will provide funding through April 2008, then what? Is everything supposed to be back to normal by then? Is this HSBC's own super SIV?, ie. is it just prolonging the pain?