Chapter 721: Losses Revealed

In addition to map software, at the end of November, Digital Future cooperated with the University of Cambridge to set up their first artificial intelligence laboratory in the world in London Technology City and began to enter the field of artificial intelligence research and development.

According to Barron's plan, in addition to the artificial intelligence laboratory in London, starting next year, two artificial intelligence-related laboratories will be established in Silicon Valley in the United States and Yanjing in China.

Artificial intelligence will be widely used in many fields in the future, including digital entertainment, manufacturing, logistics, and autonomous driving. Therefore, the field of artificial intelligence is still very important for laying out the future.

To this end, they directly allocated 10 million pounds this time to conduct research related to deep reinforcement learning and neural networks equal to artificial intelligence in colleges related to the University of Cambridge.

Based on the results of these studies, they will continue to provide additional funding.

"Industrial Bank's huge loss incident has reappeared! NM Rothschild Bank may have lost more than 3 billion euros due to traders' illegal operations!"

Just before Christmas, such reports appeared in many European newspapers, including those in England, and even American media across the ocean also had relevant reports.

For a time, the public's attention was drawn from the intensifying Greek sovereign debt crisis to France's NM Rothschild Bank.

After all, the last Société Générale, which also suffered huge losses due to traders' illegal operations, was also a French bank...

Many reports are discussing why such incidents occur frequently in France and whether it is related to their too loose financial supervision.

After this news was widely reported, the share price of LCR Rothschild Group fell by more than 10%!

Immediately afterwards, as the core company of the LCR Rothschild Group, NM Rothschild Bank immediately issued an announcement stating that they had indeed incurred certain losses due to the illegal operations of a certain trader, but the scale of the losses was not There were not as many as the rumors. According to their calculations, the damage caused by this incident was within 1 billion euros.

Now the police have intervened and have controlled the relevant personnel. More detailed explanations will be disclosed after the case is processed.

As expected by Barron, the Rothschild family finally chose to pass on most of the losses in this incident...

"Although a loss of 1 billion euros will make LCR Rothschild Group's financial statements very ugly this year, it will not have a too fatal impact on them..."

Daisy is right. After all, during the subprime mortgage crisis last time, through a gambling agreement, William Weber Capital caused NM Rothschild Bank to lose 2.5 billion euros. This time, although their actual losses were greater than The losses were higher that time, but through various means, these losses were passed on to their money management department - that is, their funders bear most of the losses, and then the private sector of NM Rothschild Bank only announced 10 A loss of 100 million euros will have an impact on the share price of LCR Rothschild Group, but it is not fatal.

"So we have prepared more 'surprises' from the beginning, right?"

Daisy knows that what Barron said is also the "insurance agreement" between some Wall Street banks, including Goldman Sachs, and the previous German financial institution. Now these agreements will be borne by the LCR Rothschild Group.

As mentioned before, in order for Greece to join the Eurozone, it hired Goldman Sachs Group to help them with "financial optimization." The specific method was:

Greece issued a US$10 billion ten-year government bond, which was listed in batches. The banks under Goldman Sachs were responsible for converting the dollars supplied by Greece into euros. When the debt matures, Goldman Sachs will still convert it into euros. Exchange back to US dollars.

The secret is that if the exchange rate is calculated according to the published actual exchange rate, there will be nothing to do.

In fact, Goldman Sachs' "idea" was to artificially set an exchange rate that would allow Goldman Sachs to lend Greece a large sum of cash without it showing up in Greece's public debt ratio.

To put it simply, if 1 euro is equal to 1.35 U.S. dollars at the market exchange rate, Greece can get 7.4 billion euros by issuing 10 billion U.S. dollars. However, Goldman Sachs used a more favorable exchange rate, allowing Greece to get 8.4 billion euros.

In other words, Goldman Sachs actually provided Greece with a loan of 1 billion euros, but this money would not appear in the calculation of Greece’s public debt ratio at the time because it would not be repaid until ten years later. In this way, With this cash income, Greece's national budget deficit is only 1.5% of GDP on paper. This meets the entry threshold of the Eurozone and allows Greece to successfully join the Eurozone.

In addition to using this method, Goldman Sachs has also designed a variety of ways for Greece to make money without increasing the debt ratio - such as using future revenues from the national lottery industry and aviation taxes as pawns in exchange for cash.

This pawn exchange method is not a liability in the calculation, but becomes a sale, that is, the securitization of bank debt.

In the end, Goldman Sachs received a commission of 300 million euros from the Greek government for this service.

However, when conducting these operations, Goldman Sachs knew full well that Greece's economy would inevitably have long-term concerns if it entered the euro zone through this method. In the end, the 1 billion euros they lent to Greece would inevitably have relatively high repayment risks.

In order to prevent its investment from going down the drain, Goldman Sachs purchased a 10-year 1 billion euro CDS "credit default swap" from a German financial institution so that the underwriter could make up for the shortfall when there was a problem with the payment of the debt.

CDS (credit default swap) can be said to be an important cause of the subprime mortgage crisis, especially American International Group, which eventually went bankrupt because it issued too many CDS related to subprime mortgage bonds.

If it was just Goldman Sachs' CDS, then LCR Rothschild Group would not be in trouble immediately. After all, the term of Goldman Sachs' 1 billion euro loan to Greece is 10 years, which is until 2011, and the CDS they purchased is also 10 years, and the expiration date is also 2011, which means there is still more than a year from now...

But in addition to Goldman Sachs' CDS, they also introduced some European sovereign debt clients including Greece to other Wall Street banks, and these banks also purchased CDS very cautiously. A considerable part of them were purchased from the German financial institution with the idea of ​​doing business with the familiar. Now the underwriter of these CDS has become LCR Rothschild Group...

And quite a few of these CDS will expire next year...