The largest bank in France, BNP Paribas SA, stopped withdrawals from three investment funds based on the inability to "fairly" value them after continuing losses in U.S. subprime mortgages.
With the funds having assests of about $2.2 billion as of August 7, they have dropped by 20 percent in under a two week period. About a third of the capital in the funds are in subprime securities rated AA or higher. The three funds are Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia.
"There are securities which simply can't be priced because there is no trading in them," said Timothy Ghriskey, chief investment officer at Solaris Asset Management LLC in Bedford Hills, New York. "There are no bids for them. Asset-backed securities, mortgage loans, especially subprime loans, don't have any buyers."
With no way of knowing what the funds are worth because they're extremely difficult to sell on, traders won't make bids, and asset managers are unable to make valuations on the assets held by the funds. With no valuation, buying and selling isn't going to happen with no knowledge of what they're worth.
For the Paris-based bank itself, Benoit de Broissia, an analyst at Richelieu Finance in Paris said, "On BNP's scale this isn't too significant. It will impact clients. It's more of an image problem."
Bear Stearns and Germany's Union Investment, a large mutual fund manager, have also stopped withdrawals on funds recently. Two Bear Stearns hedge funds have also filed for bankruptcy in the Cayman Islands recently.
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» Central Banks Add $136 Billion to Banking System from ManagersRealm
The fallout continues from the U.S. subprime market as the impact is starting to spread around the world. In response, central banks from the U.S., Canada, Europe, Japan and Australia pumped around $136 billion into the banking system to try... [Read More]
Tracked on: August 11, 2007 3:16 PM | Permalink to Trackback