BusinessCompany NewsBanks face ‘possible’ £5bn writedowns

Banks face 'possible' £5bn writedowns

Bond insurers' ratings downgrades cause potential writedown headache for global investment giants

Three of the world’s largest investment banks could potentially face
writedowns of up to $10bn (£5.1bn) after their bond insurers were downgraded by
Standard & Poors last week, reports
The
Financial Times
.

According to analysts Citigroup, Merrill Lynch and UBS have hedged their
collaterised debt obligations and mortgage backed securities of $6.3bn
(£3.23bn), $4.8bn (£2.46bn) and $3bn (£1.5bn) respectively with insurers Ambac
and MBIA.

Wall Street executives were surprised by S&P’s decision to downgrade
Ambac and MBIA from a trip A rating in February and March to a double A last
week with Moody’s expected to downgrade Ambac to double A and perhaps cut MBIA
to a single A shortly.

‘They and other credit rating agencies have been under pressure to anticipate
developments, rather than lag behind the curve, and this looks like an attempt
to do just that,’ said a Wall Street executive.

The prospects of further writedowns related to bond insurers, also known as
monolines, could deepen concerns over the financial health of US and European
banks.

Ambac and MBIA, which guarantee more than $1,000bn (£512bn) of bonds, raised
cash earlier this year to prop up their capital bases, damaged by exposure to
mortgage-backed bonds.

Although concerns have eased that bond insurer downgrades could damage the
entire financial system, there remains the potential for individual banks and
investors to suffer further pain from Ambac and MBIA’s problems.

Related Articles

BDO replaces Deloitte as Mitie auditor

Audit BDO replaces Deloitte as Mitie auditor

3m Emma Smith, Managing Editor
CVR Global appoints partner in London office

Company News CVR Global appoints partner in London office

7m Alia Shoaib, Reporter
FTSE100 failing to provide adequate ethics information

Company News FTSE100 failing to provide adequate ethics information

7m Alia Shoaib, Reporter
Moore Stephens recruits new private client partner

Accounting Firms Moore Stephens recruits new private client partner

10m Emma Smith, Managing Editor
Magma Group announces merger, partner promotions

Accounting Firms Magma Group announces merger, partner promotions

10m Emma Smith, Managing Editor
BDO on ‘recruitment spree’ with multiple partner appointments

Accounting Firms BDO on ‘recruitment spree’ with multiple partner appointments

10m Emma Smith, Managing Editor
Brand strength leads to fee income growth for RSM

Accounting Firms Brand strength leads to fee income growth for RSM

10m Emma Smith, Managing Editor
Mazars strengthens audit team with partner appointment

Accounting Firms Mazars strengthens audit team with partner appointment

10m Emma Smith, Managing Editor