logo
  Join        Login             Stock Quote

IMF Global Financial Stability Report

 April 08, 2008 02:34 PM


The IMF has announced:

The widening and deepening fallout from the U.S. subprime mortgage crisis could have profound financial system and macroeconomic implications, according to the IMF's latest Global Financial Stability Report (GFSR).
At present, the issuance of most structured credit products—instruments that pool and tranche credit risk exposures in various ways—is at a standstill and many banks are coping with losses and involuntary balance expansions, the April 2008 report said. The report examines this and other forces that could push the current credit crisis into a full credit crunch, as well as offering policy recommendations to mitigate the impact.

[Related -Optimism Moving Back Into The Equation]

The full report is available online (all 211 pages!).

There is bound to be massive excitement regarding their estimate of $945-billion in total losses due to the credit crunch - this has already been picked up by the Globe and Mail and, in turn, by Financial Webring Forum.

This figure comes from Table 1.1 of the report, and is most interesting since it is in two parts: the first half of the table estimates losses from Unsecuritized US Loans as being $225-billion on $12,370-billion outstanding (= 1.8%), while the "Estimate of Mark-to-Market Losses on Related Securities" is $720-billion on $10,840-billion outstanding (=6.6%). This is not entirely due to the somewhat different mix of these sectors - unsecuritized commercial real estate has an estimated loss rate of 1.25%, while CMBS has a loss rate of 22.3%. There will undoubtedly be some screaming that the bad paper was securitized, but let's have a look at the methodology for the estimates, found in Annex 1.2 on page 46 of the report (page 63 of the PDF):

Losses on different types of loans were estimated from regression analysis using various relevant factors, such as changes in unemployment, lending standards, and housing and commercial real estate pricing, as relevant. In each case, the outstanding stock of the type of loan was multiplied with the change in the forecasted loss (charge-off) rate. The underlying historical data on loan loss rates and changes in lending standards were obtained from the Federal Reserve.

Losses on residential and commercial mortgages were also estimated by a second procedure. This one involved a three-step process.

Next Page >>12
iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageShould You Invest In The Hottest New Trend In Finance?

Thanks to major changes in regulation, social media and technology, the business of banking has undergone read on...

article imageStrong Attractor in Action Pulling S&P 500 Down

The attractor is formed by the 200-day moving average and the 50% Fibonacci retracement of the up move from read on...

article imageIs The Weak Housing Market A Warning Sign For The US Economy?

Today’s US economic releases – housing starts and business survey data for the manufacturing sector – read on...

article imageShort-term Pullback or Something Worse?

A few weeks ago when we called for a short-term pullback of 4 to 5%, it was due solely to the short-term read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

The CLO Market - Then And Now
More Articles on: Medical



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.