Big banks unlikely to slip on credit crunch spill
September 6, 2007
By Evan Pickworth
Johannesburg - Large banks are not expected to default due to the credit market dislocation that has followed the sub-prime crisis, Moody's Investors Service reported in an international policy perspective on Thursday.
"Indeed we view the possibility of any bank of any importance or visibility defaulting during this crisis as very unlikely," noted the Moody's analysts.
"We are in the midst of a flight to quality and a somewhat disorderly re-pricing of credit risk in a number of fixed income markets," explained the analysts.
They pointed out that a return to normality would not happen overnight.
"Before the credit markets can resume normal functioning, the creation of a new price consensus between (and among) buyers and sellers of risk instruments will be required.
"This will not be a quick process because many leveraged capital market participants are facing inventory problems with respect to certain structured finance securities, including sub-prime," concluded the analysts.
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