Barclays Capital have warned that banks may make greater losses on sub-prime exposure if bond insurance lose their top credit ratings. Losing their top credit ratings may mean the insurers pay out less frequently, resulting in banks making greater losses. With the world’s biggest banks already having lost in excess of £50 billion in the wake of the sub-prime crisis, and over £400 billion of securities guaranteed by bond insurers remaining, the falls in the stock market last week have set alarm bells ringing in some quarters.
It has been suggested that £77 billion would be required to overcome the deficit created by the weakening of bond insurers, though it is hoped such a circumstance won’t arise. With the world’s leading banks reporting losses for 2007, with particularly detrimental final quarters, the possibility of further losses will do the world’s leading economies no good whatsoever.
Further Losses Imminent if Bond Insurers Lose Credit Ratings
Further Losses Imminent if Bond Insurers Lose Credit Ratings
Fri, 01 Feb 2008
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