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December 10, 2012

US banks in fresh structured finance spree

“US banks have increased their holdings of structured financial products to the highest level since 2009 in an effort to boost profits in the face of continued record low interest rates.

Banks’ structured finance investments surged to $48bn in the third quarter of this year, according to data released last week by the Federal Deposit Insurance Corporation (FDIC). That is the highest since the FDIC began breaking out the investments in mid-2009, and a 25 per cent rise on the same period last year.

Analysts say that banks have been snapping up higher-yielding structured securities to offset the effect of low interest rates. While banks’ total revenues have surged due to a boom in mortgage refinancings and loan sales, the interest the companies earn from their assets and loans has dropped sharply.”
 
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