Reality.............
ECB's Wellink--crisis could cost 1.2 trln euros-media
Sat Sep 15, 2007 9:34am EDT
AMSTERDAM, Sept 15 (Reuters) - European Central Bank
Governing Council member Nout Wellink said the global credit
crisis could cost up to 1,200 billion euros ($1.666 billion) in
a worst case scenario, Dutch media reported on Saturday.
The maximum costs of the credit crisis represent some 1,200
billion euros in financial products derived from home loans made to borrowers with poor credit records and repackaged and sold on as asset backed securities to investors globally, Wellink said at a Friday meeting of European finance ministers in Porto, Portugal, Dutch media reported.
A credit squeeze in global markets that emerged from
problems in the U.S. subprime mortgage market has led to banking casualties such as American Home Mortgage Investment Corp (AHMIQ.PK: Quote, Profile, Research) and SachsenLB and IKB (IKBG.DE: Quote, Profile, Research) in Germany.
British mortgage lender Northern Rock (NRK.L: Quote, Profile, Research) on Friday received an emergency loan from the Bank of England.
Total costs of 1,200 billion euros are "a worst case
scenario," Wellink said, according to Dutch daily NRC
Handelsblad.
"It could also affect 50 percent or 25 percent (of 1,200
billion euros.) No one knows," he said, adding that 1,200
billion euros represents 9 percent of all bank balance sheets
globally.
Wellink said it would take a few months before it was clear
how much banks would have to write off on their credit assets,
but banks could absorb the amount and would also be able to
finance it, Dutch press agency ANP reported.
"There is enough money. But we have to wait for the moment
that banks are again willing to lend their reserves to each
other. Trust is key," ANP quoted Wellink, who is also president
of the Dutch Central Bank (DNB), as saying.
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