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This is certainly something that rattles the bones. Read this article from Reuters, but it essentially confirms, via 2 unnamed sources, that the Commodity Futures Trading Commission issued a wavier to a mystery bank on Friday after its exposure to the energy sector increased past $1B. This is a critical threshold created in the wake of the 2008/9 financial crisis. That bank was Capital One.
WASHINGTON/NEW YORK (Reuters) – U.S. lender Capital One Financial Corp got a waiver from the Commodity Futures Trading Commission (CFTC) after plunging oil prices increased the bank’s derivatives exposure above a key regulatory threshold, according to two sources with knowledge of the matter.
The assertion is Capital One must have bet big that oil prices wouldn’t plummet to the levels they’re currently at, and Cap1 has found itself on the wrong side of a big trade. The waiver, which expires Sept 30th, gives Cap1 some breathing room and time to allow energy prices to come back up. If not… they would have to register as a swap participant, and secure their position with collateral. What does that mean? It would mean they would more than likely have to pony up some major cash to meet regulatory guidelines. Reuters says that Cap1 only allocated 1.4% of its loan book to the energy sector – part of that business being commodity swaps in the energy sector.
Covid was certainly a black swan, and many consider the broil over oil another black swan…although not nearly as statistically improbable as a global pandemic shuttering economies around the world. Nonetheless, Tthe feud between Russia and Saudi Arabia is still going strong, many even questioning whether there will be containers to store the oil all of the oil produced let alone prices spiking. This presents a very big problem for Cap1 if things don’t improve by end of September. In fact, US storage containers will be full up within 30 days if production continues as is; however, Saudis have intimated that they may even increase oil production by 25% to 12 million barrels a day in April. Current prices are well below the level needed to turn a profit, but both countries have healthy foreign reserves, and the fued could drive prices into the teens. I don’t think anyone is looking around the globe and forecasting a major rush in industrial output through April, but an oil glut isn’t going to help things in the energy sector.
This story stuck out to me because Capital One changed the game at the end of 2018, by not only offering the ability to transfer points to partner programs, but also a mega 200k+ offer on their Spark Miles card. Many of their partners crossover with other bank programs like Aeroplan, Air France, Emirates, Singapore, etc. If you’re holding a major balance in Cap1…I would keep a close eye on this story as it develops through the summer.
Here’s a list of Cap1 transfer partners
- Aeromexico
- Air Canada Aeroplan
- Air France/KLM
- Alitalia
- Avianca
- Cathay Pacific
- Emirates ( 2:1)
- Etihad
- EVA
- Finnair
- Hainan
- JetBlue
- Qantas
- Qatar
- Singapore Airlines ( 2:1 )
Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
Chase Sapphire Preferred® Card
Welcome Offer
60k Points after $4k spend in 3 months
Annual Fee
$95
Points Earned
Transferrable Chase Ultimate Rewards
- 60k points after $4k spend in 3 months
- Worth $750 in Chase Travel℠ and way more if you maximize transfer partners
- 5x on all travel purchased through Chase Travel℠
- 3x on dining, including eligible delivery services for takeout & dining out
- 3x on select streaming services
- 3x on online grocery purchases
- (excluding Target, Walmart and wholesale clubs)
- $50 Annual Chase Travel Hotel Credit via Chase Travel℠
- The begins immediately for new cardmembers and after your account anniversary for existing cardmembers
- 2x on all other travel
- 10% Anniversary Bonus
- Every year you keep the card, your total spend will yield a 10% points bonus. If you spend $10k in a year, you’ll get 1k bonus points
- Chase Sapphire Preferred continues to redeem at 1.25c in the Chase Travel℠ and the slew of other benefits remain in tact including Auto Rental Collision Damage Waiver ( primary ), purchase protections, etc.
- Points are transferrable to 14 Ultimate Rewards partners
- Redeem in Chase Travel℠ for 1.25 cents per point
- No foreign transaction fees
- Suite of Travel and Purchase Coverage
- Auto Rental Collision Damage Waiver is my favorite
- Get complimentary access to DashPass which unlocks $0 delivery fees and lower service fees for a minimum of one year when you activate by December 31, 2024
- $95 Annual Fee
We keep an up to date spreadsheet that lists the best ever offers: You can find that spreadsheet here.
Historically 80k is a very, very good offer and hit in both 2022 and 2023. In 2021, we saw the offer hit an all time high of 100k. Who knows if that will ever come back.
Main Cast:
Cards that earn flexible points and should be used on the bulk of your purchases.
Supporting Cast:
Cards that earn fixed points in the currency of the airline/hotel and can not be transferred at attractive rates. These cards yield benefits that make it worth keeping, but not necessarily worth putting a lot of your everyday spend on.
The Chase Sapphire Preferred® is exceptional starter card and offers transferrable Ultimate Rewards, and pairs well with other Chase cards.
If you carry this card alongside Chase’s cashback cards like the Chase Freedom Flex℠and Chase Freedom Unlimited® or the business versions: Ink Business Cash® , Ink Business Unlimited® you can combine the points into Preferred account and transfer into hotel and airline partners
Annual fee is quite low at $95 a year + you get a 10% anniversary bonus on points + $50 hotel credit in Chase travel.
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