Australia’s third biggest bank, Melbourne-based Australia & New Zealand Banking Group Ltd (ANZ) reported today a $US200m one-off loss provision relating to its exposure to US debt insurer ACA Capital Holdings.

Michael Smith, ANZ chief executive, said the bank's exposure to the US monoline bond insurer might be recovered over time but uncertainty about its ability to meet its obligations had forced the bank to make a provision to cover any potential loss.

‘Today though, the bottom line is the derivative accounting standards mean we will take a provision on this exposure of approximately $US200m (₤102m) – this is driven by the accounting standards,’ Smith told an investors' briefing, according to Interactive Investor.

Bloomberg.com reports ANZ had bought default protection on a portfolio of investment grade companies from ACA using a credit-default swap, a derivative used to speculate on corporate credit quality. After ACA was cut to non-investment grade, the bank was required to raise an ‘individual provision’ of $200 million.

Read the story in the Interactive Investor