By Bloomberg News – Sep 20, 2011 9:26 AM GMT+0100
Bank of China Ltd. (3988) has stopped trading foreign-exchange forwards and swaps with several European banks on concerns about the region’s debt crisis, Reuters reported, citing three unnamed people.
The banks include Societe Generale (GLE) SA, Credit Agricole SA (ACA) and BNP Paribas, after Moody’s Investors Service lowered or put their credit ratings on review for possible downgrades, Reuters reported today.
Moody’s put the companies on review for a possible cut on June 15, citing the risks posed by their investments in Greece. Since then, concern over Europe’s escalating sovereign debt crisis has crimped the ability of the region’s banks to raise funds in dollars.
The Chinese bank also halted trading with UBS AG, which disclosed a $2.3 billion loss from unauthorized trading, Reuters said. Italy’s credit rating was cut by Standard & Poor’s to A from A+ as weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro- region’s second-largest debt burden.
Bank of China’s credit risk-weighted amounts of currency forwards, swaps and cross-currency interest rate swaps totaled 16.3 billion yuan ($2.6 billion) as of June 30, a 28 percent increase from end of 2010, according to the lender’s first-half report. Forwards are agreements to buy or sell assets at a set price and date. Currency swaps are agreements between two parties to exchange future payments in one currency for payments in another currency.
Wang Jianqiang, Bank of China’s Beijing-based risk management general manager, didn’t answer calls to his office seeking comment. UBS’s Hong Kong-based spokesman Mark Panday and Credit Agricole’s Paris-based spokeswoman Charline Coue declined to comment. Lilian Kung, a spokeswoman at BNP Paribas (BNP), and Societe Generale spokeswoman Carmen Lee, both based in Hong Kong, didn’t immediately respond to an e-mail seeking comment.
–Zhang Dingmin, Fion Li. Editors: Linus Chua