Global Banks Write Down 80% of Subprime Losses
Sunday, May 18, 2008
A new report from ratings agency Fitch Ratings said Wednesday that global banks with subprime mortgage assets have already written down more than 80-percent of their losses related to the subprime mortgage crisis.
Fitch estimates that global losses related to subprime mortgage assets will hover somewhere between $400 to $550 billion, with varying amounts depending on the accounting methodology utilized.
”Approximately 50-percent of these losses, $200 to $275 billion in U.S. dollars, are held by banks, with the remainder held by financial guarantors, insurance companies, asset managers and hedge funds,” Fitch said in a statement about the report.
To date, Fitch says banks have reported losses of $165 billion, or 83-percent of the bank’s share of the losses, in relation to subprime residential mortgage-backed securities and collateralized debt obligations.
"To the extent that institutions have effectively hedged their exposures with financially sound counterparties, these loss figures may be over-estimated," said Gerry Rawcliffe, managing director and group credit officer for Fitch's Financial Institutions Group. "Nevertheless, for those institutions that did not hedge a sufficient portion of their super-senior exposures, mark-to-market losses on these residual exposures have been so large that their capital ratios have come under acute stress."
Fitch estimates that global losses related to subprime mortgage assets will hover somewhere between $400 to $550 billion, with varying amounts depending on the accounting methodology utilized.
”Approximately 50-percent of these losses, $200 to $275 billion in U.S. dollars, are held by banks, with the remainder held by financial guarantors, insurance companies, asset managers and hedge funds,” Fitch said in a statement about the report.
To date, Fitch says banks have reported losses of $165 billion, or 83-percent of the bank’s share of the losses, in relation to subprime residential mortgage-backed securities and collateralized debt obligations.
"To the extent that institutions have effectively hedged their exposures with financially sound counterparties, these loss figures may be over-estimated," said Gerry Rawcliffe, managing director and group credit officer for Fitch's Financial Institutions Group. "Nevertheless, for those institutions that did not hedge a sufficient portion of their super-senior exposures, mark-to-market losses on these residual exposures have been so large that their capital ratios have come under acute stress."
