Further sub-prime losses expected in British banks
by Kay Murchie
A report from the International Monetary Fund (IMF) shows that British banks will have to take an extra £11 billion from sub-prime losses - in addition to the £9.6 billion write-downs already announced.
UK lenders are sitting on far larger undisclosed mortgage-related losses than its European counterparts, according to figures in the Global Financial Stability report.
In comparison, lenders in the US and the rest of Europe have already revealed their losses. In Europe, top lenders will probably total around £6 billion of additional losses while lenders in the US could report a further £25 billion of write-downs, but that is only half the figure they have already confessed to.
Earlier this week, the IMF warned that losses from the worldwide credit crunch could reach $1 trillion (£500 billion).
Experts have tried to estimate the cost of one of the worst financial disasters in history but have not exceeded $600 billion. The trillion figure (a million billion) will result in requests for further state intervention to balance credit markets.
Commenting on the report, IMF official Jaime Caruana said the credit shock emanating from the US sub-prime crisis is set to broaden amid a significant economic slowdown.
With a weakening economy, write-downs and prospects for further losses are placing additional pressure on banks’ balance sheets, which may limit their capacity to lend. Britain is particularly vulnerable to the cash crunch because of its over extended property market, concluded Mr Caruana.
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