The effects of the meltdown in the US sub-prime mortgage market are likely to be limited for European larger banks, but could impact more on smaller institutions, Moody’s Investors Service has predicted.
“Europe’s large banks are able to post solid firm-wide results despite write-downs resulting from the severe decline in prices and evaporation of liquidity within the sub-prime sector,” says a statement from the service. “Smaller players that have significant direct or indirect exposures to the sub-prime sector may find that their liquidity, risk management capabilities or financial resources are less adequate to absorb any valuation adjustments and corresponding liquidity requirements.”
News of the projections comes after Swiss bank Credit Suisse posted profits of $2.7 billion, with a statement accompanying the results adding that it had reduced its sub-prime business so that it currently makes up two per cent of its total investment banking revenues.