The number of bank rescues where major banks are either bailed out by governments or private investors in hurried, last minute deals in Britain, Germany, France and the US continues to climb.

A rough running total of the global cost is over $US100 billion. This doesn’t include the write-downs and losses, just the cost of rescuing these stricken organisations. Up to a dozen major banks and lenders have needed saving or recapitalising through finding new shareholders or selling debt to shareholders at high yields and deep discounts.

The spreads on bank debts widened last week to exceed those of blue chip companies, such is the upsurge in concern about the exposure the banks have to leveraged corporate and commercial property debts, especially in the UK and continental Europe.

The latest bailout was in Germany, the third bank in that country to be thrown a lifeline. WestLB AG, a state government-owned German bank crippled by subprime-related losses and share trading gone bad, will slash staff by 25% after its owners agreed to provide a US$7.2 billion (More than $A8 billion) bailout. 

Landesbank Sachsen AG and IKB Deutsche Industriebank AG, two other German state-owned banks, received multi-billion-euro bailouts last year after investing in subprime mortgages and losing billions of dollars in actual or possible write-downs.

Friday saw also fears about the outlook for corporate and commercial property debt reach new heights in the US and Europe as investors liquidated holdings in a sign of spreading credit turmoil. The Financial Times reported that some of the world’s largest investment banks are braced for further losses on loans to private equity groups after the drop last week.

“Morgan Stanley analysts on Wednesday suggested that, based on recent pricing data, investment banks could be forced to write down the value of leveraged loans stuck on their balance sheets by a further $20bn.”

In Tokyo at the weekend, German Finance Minister Peer Steinbrueck said financial institutions around the world face $US400 billion of write-offs as a consequence of the U.S. subprime mortgage crisis.

Peter Fray

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