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US subprime exposure in thai banks

Fitch Ratings just reported on US subprime mortgage exposure in asia pacific’s banks. It is a good read to see the extent of direct impact on investment, in contrast to the secondary impact from global liquidity dry out.

Thailand: Siam Commercial Bank (SCB) and Kasikornbank (KBank) reported no exposures to CDOs, while Bangkok Bank (BBL), Krung Thai Bank (KTB) and Bank of Ayudhya (BAY) reported some exposure, mostly to higher rated tranches (‘A’ and above). The level of exposure ranges up to 6% of equity so that a loss on the portfolio could impact annual earnings but should not threaten solvency. BankThai has more substantial CDO investments including THB1.7bn of US subprime-related (21% of equity) against which it has already taken a THB0.3bn write-down.

Full report here. (free subscription required)

As of now, BankThai has maintain its refusal to mark the subprime-backed CDO to market value, stating it intends to hold the instruments to maturity and thus using the cost method for their balance sheet accounting.

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