Saturday, May 24, 2008

Credit Crisis Risk Management At Merrill Lynch

Suffering from the continuing credit crisis, Merrill Lynch has named Doug Mallach, the head of U.S. fixed income sales, to manage a group that will figure out how to get rid of troubled or under-performing assets.

Under Mallach, the group will help Merrill Lynch figure out whether to sell, restructure or hold onto assets such as collateralized debt obligations that have been affected by the sub-prime mortgage crisis. Merrill had more than $6.6 billion of net exposure to asset-backed CDOs as of March this year. The group will also focus on fixed income assets and the currencies and commodities business.

Having already written down more than $30 billion of assets since last year, Merrill Lynch is looking for ways to trim its trillion dollars of assets and raise some capital. Merrill is also shrinking its mortgage and structured finance business by selling off assets that trade infrequently and reducing certain kinds of trading activity.

Merrill's move isn't unusual. Regulators and investors worldwide are pressuring banks to shed assets and raise capital to reduce leverage or debt levels relative to assets.

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