LONDON, Aug 19, 2007 (AFP) – The world’s banks have found themselves in the eye of the financial storm lashing world markets as analysts struggle to pinpoint their exposure to the slumping US housing sector. Markets in Europe and the United States staged a rebound on Friday, after a week of turmoil, as the US Federal Reserve acted to ease credit crunch concerns by cutting one of its key lending rates.
Since last month, with rising numbers of American households failing to meet their subprime mortgage repayments, global equities have tumbled in value with banks bearing the brunt of the share price falls.
Traders are worried that more and more banks and investment funds around the world will reveal the total extent of their losses from troubles in the US subprime or high-risk home loan sector, analysts said.
“It will take time for markets to assess the extent of the losses due to the decline in sub-prime markets,” said Henk Potts, analyst at Barclays Capital.
“Until analysts have a much better understanding of the losses and their potential impact, (stock market) volatility will remain.”
The crisis is centred in the United States but has global ramifications because many of the world’s