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OFFICIAL CORRECTION Limited rating effect on banks from subprime downgrade - S&P
Thu, Jan 31 2008, 15:53 GMT
http://www.afxnews.com
(S&P corrects to remove reference to FHLBs in 2nd last par)
MUMBAI (Thomson Financial) - Standard & Poor's Ratings Services sees a limited rating effect on banks -- resulting from the agency's recent negative actions on 534 bln usd worth of debt securities backed by US subprime mortgage loans -- but warned of higher losses for financial institutions across the world.
"In particular, some large European banks have not reported yet, and we currently expect upward revision of losses," the agency cautioned.
S&P added that consequent rating actions on banks are likely to be in the range of an outlook change or a one-notch downgrade.
S&P downgraded and signalled it may lower its ratings on 534 bln usd worth of US residential mortgage-backed securities and other complex debt packages, and suggested that these actions could affect bond pricing and liquidity in certain sectors.
For example, the agency said investors whose investment guidelines do not allow them to hold lower rated instruments could be forced to divest, creating the potential for an imbalance in the markets.
Many of the largest global financial institutions have already taken significant losses on their exposures of such complex debt backed by loans made to people with poor credit histories.
"For those institutions, we believe that these ratings actions are not likely to add significantly to the more than 90 bln usd of losses already reported. However, we believe that total losses for financial institutions will eventually reach more than 265 bln usd," S&P said.
It opined that the downgrades of mortgage securities could lead to the realization of those losses.
Further, S&P sees potential losses moving to regional banks, credit unions, and government-sponsored enterprises in the US. Certain Asian banks are also exposed, it added.
The agency also believes that the ripple effect will have implications for trading revenues, general business activity, and liquidity for banks.
[email protected]
jro/ami/ran/ajb
COPYRIGHT
Copyright Thomson Financial News Limited 2007. All rights reserved
Thu, Jan 31 2008, 15:53 GMT
http://www.afxnews.com
(S&P corrects to remove reference to FHLBs in 2nd last par)
MUMBAI (Thomson Financial) - Standard & Poor's Ratings Services sees a limited rating effect on banks -- resulting from the agency's recent negative actions on 534 bln usd worth of debt securities backed by US subprime mortgage loans -- but warned of higher losses for financial institutions across the world.
"In particular, some large European banks have not reported yet, and we currently expect upward revision of losses," the agency cautioned.
S&P added that consequent rating actions on banks are likely to be in the range of an outlook change or a one-notch downgrade.
S&P downgraded and signalled it may lower its ratings on 534 bln usd worth of US residential mortgage-backed securities and other complex debt packages, and suggested that these actions could affect bond pricing and liquidity in certain sectors.
For example, the agency said investors whose investment guidelines do not allow them to hold lower rated instruments could be forced to divest, creating the potential for an imbalance in the markets.
Many of the largest global financial institutions have already taken significant losses on their exposures of such complex debt backed by loans made to people with poor credit histories.
"For those institutions, we believe that these ratings actions are not likely to add significantly to the more than 90 bln usd of losses already reported. However, we believe that total losses for financial institutions will eventually reach more than 265 bln usd," S&P said.
It opined that the downgrades of mortgage securities could lead to the realization of those losses.
Further, S&P sees potential losses moving to regional banks, credit unions, and government-sponsored enterprises in the US. Certain Asian banks are also exposed, it added.
The agency also believes that the ripple effect will have implications for trading revenues, general business activity, and liquidity for banks.
[email protected]
jro/ami/ran/ajb
COPYRIGHT
Copyright Thomson Financial News Limited 2007. All rights reserved
