Rebirth of England.

Chapter 721 Losses
In addition to mapping software, at the end of November, Digital Future partnered with Cambridge University to establish their first global artificial intelligence laboratory in London's Science 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, USA and Yanjing, China respectively.

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 planning for the future.

To this end, they directly put out 1000 million pounds of funds this time to conduct research on deep reinforcement learning, neural networks and artificial intelligence with relevant colleges of Cambridge University.

They will continue to add funding based on the results of these studies.

"The Industrial Bank's huge loss incident reappeared! NM Rothschild Bank may have lost more than 30 billion euros due to illegal operations by traders!"

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

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

After all, the last bank that suffered huge losses due to traders’ illegal operations, Societe Generale, was also a French bank…

Many reports have discussed why such incidents occur frequently in France and whether it is related to their overly lax financial supervision.

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

Then, as the core company of LCR Rothschild Group, NM Rothschild Bank immediately issued an announcement, saying that they did suffer certain losses due to the illegal operations of a certain trader, but the scale of the losses was not as large as rumored. According to their calculations, the losses caused by this incident were within 10 billion euros.

The police have now intervened and have taken control of the relevant personnel. More detailed information will be disclosed after the case is handled.

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

"Although the loss of 10 billion euros will make LCR Rothschild Group's financial statements this year look very ugly, it will not have a fatal impact on them..."

Daisy was right. After all, during the last subprime mortgage crisis, William Weber Capital caused NM Rothschild Bank to lose 25 billion euros through a bet agreement. Although their actual losses this time were higher than that time, they passed these losses to their fund management department through various means - that is, let their investors bear most of the losses, and then the private sector of NM Rothschild Bank only announced a loss of 10 billion euros. This would have an impact on the share price of LCR Rothschild Group, but it would not be fatal.

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

Daisy knew that what Barron was talking about was 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 to join the euro zone, Greece hired Goldman Sachs to help them with "financial optimization". The specific approach was:

Greece issued a 100-year government bond worth $ billion, which was listed in batches. Banks under Goldman Sachs were responsible for converting the US dollars supplied by Greece into euros, and when the debt matured, Goldman Sachs would still convert it back into US dollars.

The secret lies in that if the exchange is calculated based on the actual public exchange rate, there will be no tricks.

In fact, Goldman Sachs' "idea" was to artificially formulate an exchange rate that would allow Goldman Sachs to lend a large amount of cash to Greece without it being reflected in Greece's public debt ratio.

Simply put, if 1 euro is equal to 1.35 US dollars at the market exchange rate, Greece can obtain 100 billion euros by issuing 74 billion US dollars, but Goldman Sachs used a more favorable exchange rate, allowing Greece to obtain 84 billion euros.

In other words, Goldman Sachs actually loaned Greece 10 billion euros, but this money would not be included 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, Greece had this cash income, making the national budget deficit only 1.5% of GDP on paper, which met the entry threshold of the euro zone and allowed Greece to successfully join the euro zone.

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

This method of pawning for cash is not a liability in calculation, but becomes a sale, that is, securitization of bank debt.

In the end, Goldman Sachs received a commission of 3 million euros from the Greek government for its services.

However, when carrying out these operations, Goldman Sachs was well aware that Greece's entry into the euro zone through this means would inevitably lead to long-term economic concerns, and that the 10 billion euros they lent to Greece would ultimately have a relatively high repayment risk.

In order to prevent its investment from going down the drain, Goldman Sachs purchased a 10-year, 10 billion euro CDS "credit default swap" from a German financial institution so that the insurer could make up 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 the 10 billion euro loan from Goldman Sachs to Greece is 10 years, which is until 2011, and the CDS they purchased is also 10 years and expires in 2011, which means there is still more than a year from now...

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

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

(End of this chapter)