By Renee Schultes
The top five U.S. broker-dealer banks have a combined $23 billion in uncollateralised exposures to AAA counterparties, part of which is with monoline bond insurers that have been weakened by the sub-prime mortgage crisis.
Monolines insure $2.3 trillion of debt, including structured credit and municipal bonds, according to research by Swiss bank UBS.
Tuesday, January 29, 2008
BofA Sees Potential 'Disaster' in Credit Default Swap Market
January 28, 2008 12:35 PM EST
According to reports from Bloomberg, citing a Bank of America research report, a default of a bond insurer, like ACA Capital (OTC: ACAH), could trigger a "disaster" in the credit-default swaps market.
The report said, ACA Capital may face delinquency proceedings from Maryland Insurance Administration because it can't pay $60 billion of credit-default swaps. The firm said even a credit event for a relatively small monoline, like ACA, could have significant implications. They see huge potential problems for settling credit-default swaps contracts.
According to reports from Bloomberg, citing a Bank of America research report, a default of a bond insurer, like ACA Capital (OTC: ACAH), could trigger a "disaster" in the credit-default swaps market.
The report said, ACA Capital may face delinquency proceedings from Maryland Insurance Administration because it can't pay $60 billion of credit-default swaps. The firm said even a credit event for a relatively small monoline, like ACA, could have significant implications. They see huge potential problems for settling credit-default swaps contracts.
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