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Huge write-downs may be bottoming out, S&P forecasts

Write-downs of subprime asset-backed securities by financial institutions worldwide are expected to total US$285 billion, Standard & Poor's Ratings Services said in its latest reports, increasing previous estimates by more than US$20 billion.

The reports, published on Thursday, reflect an increase in the ratings agency's latest estimate over its previous forecast of US$260 billion made earlier this year.

While S&P said it expected to see more write-downs in coming weeks and months, the massive write-downs might be bottoming out, the report said.

"The end of write-downs is now in sight for large financial institutions," it said.

Subprime asset-backed securities (ABS) include both collateralized debt obligations (CDOs) and residential mortgage-backed securities (RMBS).

The increased write-downs on these subprime investments since last year resulting from the global credit crunch have been haunting investors, with Carlyle Capital Corp becoming the latest victim with a US$16.6 billion mortgage debt default announced on Thursday.

"The positive news is that, in our opinion, the global financial sector appears to have already disclosed the majority of valuation write-downs of subprime ABS," S&P analyst Scott Bugie wrote.

But the reduced subprime risk in the financial system "will be offset by worsening problems in the broader US real estate market and in other segments of the credit markets," he said.

In Taiwan, financial institutions including banks and insurance companies have reported NT$93.64 billion (US$3.05 billion) in total exposure to subprime investments and structured investment vehicles (SIVs) at the end of January, down from NT$97.2 billion the previous month, Financial Supervisory Commission figures released on March 4 showed.

Losses generated by Taiwanese banks and insurers' subprime investments and SIVs totaled NT$24.9 billion in January, up from NT$23.7 billion in December last year, the tallies showed.

Also See: Carlyle looking at ways to help investors: co-founder
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