The real leverage of BNP Paribas is … 27.2!
Indeed, the French bank counts in its equity item 2: Undated Super Subordinated Notes eligible as Tier 1 capital which are actually a form of liabilities related interests subject to some conditions.
Document 1 (top of page):
Document 2 (bottom of page):
Equity published in item 1: Capital and retained earnings at June 30, 2011 (76.254 billion) should be reduced by Undated Super Subordinated Notes (item 2: 8.038
billion) to determine the true equity at fair value (item 3) i.e. 68.216 billion of euros.
Document 3:
Total liabilities are equal to total assets (item 4: 1,926.079 billion) less the true equity at fair value (item 3): 1,857.863 billion of euros.
So, the leverage is the ratio of total liabilities on equity: 27.2 i.e. a Tier 1 ratio at 3.7%.
BNP Paribas did not respect the rules of prudential borrowing as they were defined by Alan Greenspan.
Document 4:
The bank cannot lower the leverage below 25.
To be good leveraged, it should increase the equity until 108 billion of euros!
French state should be recapitalized (nationalized) this Gosbank because it is too big to fail with liabilities at… 1.857 trillion of euros for an annual GDP of France nearly at 2.000 trillion: 1,700 € per inhabitant (64 million)!
French (and European) banks have adopted rules of leverage at their convenience, which do not correspond to those internationally adopted. For example, they account in the equity quasi-equity which are actually liabilities as these Undated Super Subordinated Notes.
Click here to read the latest Consolidated Financial Statements First half, 2011
| BNP | 2009 | 2010 | 2011 Q2 |
|---|---|---|---|
| Liabilities | 1,997,417 | 1,931,724 | 1,857,863 |
| Equity | 60,281 | 66,434 | 68,216 |
| µ (leverage) | 33.1 | 29.1 | 27.2 |
| Tier (%) | 3.0 | 3.4 | 3.7 |
