Monday, October 31, 2011

MF Global Leverage

This is a slide pulled from MF Global's most recent quarterly earnings call presentation highlighting the amount of leverage at the company.  What caught my eye was the way in which this slide demonstrates how Basel III encourages significant leverage as long as assets are "risk free" government debt.  Look at the discrepancy between the leverage at MF including sovereigns and excluding them.  30x vs. 6x--and the sovereign positions were what ultimately killed the company.  If this were a European Bank, MF would have reported a 16% Tier 1 ratio.

Click to Enlarge

No comments:

Post a Comment

For compliance reasons, I don't post comments to the site, but I do like hearing from readers and am happy to answer any questions. Feel free to use the comment box to get in touch. Please leave an email address in your comment so that I can write back, or email me directly at Skrisiloff@avondaleam.com.