Regulator checks that banks and brokers show exposure to US sub-prime mortgages correctly in their accounts
Accountancy Age, 13 Aug 2007
The massive falls in world stock markets last week have prompted the US Securities and Exchange Commission to check the books of leading Wall Street brokers and banks.
The watchdog is checking up on the financial institutions to ensure that they are not obscuring their exposure to the sub-prime mortgage market in the US and that they are all accounting for this exposure in a consistent way.
According to the Sunday Times the SEC will checking the accounts of the top five Wall Street firms and the securities departments of commercial banks.
Markets went into freefall last week as investors fled from securities following sudden and unexpected losses incurred by financial institutions exposed to the sub-prime American mortgage market.
The FTSE 100 lost 3.7% or £63bn, its worst loss in a single day for four years. Stocks in Asia and Europe also suffered heavy losses.
Central banks in Europe, the US and UK have all injected billions of pounds into the markets in an effort to stem the crisis and maintain liquidity and ease the credit crunch caused by bad loans in the sub-prime market.
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