HSBC's German unit warns of Y2K slowdown

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HSBC's German unit warns of Y2K slowdown 04:26 a.m. Nov 11, 1999 Eastern LONDON, Nov 11 (Reuters) - Global banking unit HSBC Holdings Plc said on Thursday its 73.5 percent owned investment and private banking unit HSBC Trinkaus & Burkhardt expected a below average result in the final quarter of 1999 because of a slowdown in trading linked to the Year 2000 computer problem.

The Dusseldorf-based Trinkaus & Burkhardt reported a 33.2 percent rise in pre-tax profit to 87.9 million euros ($91.65 million) for the nine months to September 30.

This is one of the first public profit warnings by an investment banking operation about the late 1999 Y2K trading effect.

But HSBC said the unit's managing partners expected a lower number of securities transactions in the fourth quarter of 1999 as customers held back on trading pending possible Y2K issues.

-- Roland (nottelling@nowhere.com), November 11, 1999

Answers

Roland,

Thanks for the post.

"But HSBC said the unit's managing partners expected a lower number of securities transactions in the fourth quarter of 1999 as customers held back on trading pending possible Y2K issues."

How intelligent of these guys. Predicting traders will "wait and see" if they lose all their money before trading. Using this same logic, I suppose shoppers will "wait and see" if Y2K is bad before they begin to stock-up.

I'm not too bright but won't it be too late to "trade" or "stock-up" after the fact???

Just a thought.

-- GoldReal (GoldReal@aol.com), November 11, 1999.


GoldReal,

I believe this refers to the "Herstatt Risk" primarily to foreign currency exchange and debt transactions - it is >USD 2 trilion per day. Gogerty of International Monitoring testified to US Senate Y2K Committee on this on Oct 13, 1999 - it is in the archives of this forum.

The primary concern per Gogerty is counterparty risk which I understand to mean that global traders will not put their money at risk to buy or sell until they are certain that the party on the other side of their trade can live up to their part of the deal. This has grave implications for trade as import and export requires opening of Letters of Credit as payment simultaneous to transfer of goods.

Hesrtatt refers to German bank that could not settle obligations which resulted in a gridlock where many banks could not settle either; because Bank A could not pay Bank B until Bank C paid them but Bank C was waiting for Bank D etc, etc, etc.

At USD 2 trillion per day the delay in settlement would cost the party expecting the transdfer millions per hour in lost interest.

Hence many banks are expected to reduce trading in late December and not resume trading until counter parties prove their compliance and their ability to transact business accurately.

It appears HSBC is confirming Mr. Gogerty's testimony.

-- Bill P (porterwn@one.net), November 11, 1999.


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