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Subprime Waves Ripple Across Europe

Crises at German and Norwegian banks underscore exposure to US collapse

By Jim O'Neill,  Newser User

Posted Nov 29, 2007 1:59 PM CST
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(Newser) – The ripples from the US subprime collapse continue to rock Europe as a group of German banks agreed to bail out troubled IKB Deutsche Industriebank, reeling from additional risk from US bond investments. Meanwhile, four Norwegian municipalities scrambled to recover after they they invested $156 million in now fading US municipal bonds, the Wall Street Journal reports.

Despite an August bailout, IKB said it could face a liquidity shortfall. State-owned development bank KFW, which owns 38% of IKB, said market developments led to “a dramatic worsening” of the situation. The Norwegian towns, meanwhile, face compounding losses because they used borrowed money to buy the securities from a broker heading into bankruptcy.

The Citigroup Center is shown on Monday, Nov. 5, 2007 in New York. Stocks fell but regained some ground Monday as a stronger-than-expected reading on the service economy mitigated concerns about soured debt that sprang from news of more Citigroup Inc. write-downs. (AP Photo/Mark Lennihan)
The Citigroup Center is shown on Monday, Nov. 5, 2007 in New York. Stocks fell but regained some ground Monday as a stronger-than-expected reading on the service economy mitigated concerns about soured...   (Associated Press)
The headquarters of German lender IKB Industriebank AG are seen in Duesseldorf, western Germany, in this July 30, 2007 file picture. IKB, hit by its exposure to the U.S. subprime lending crisis, expects to lose up to euro700 million (US$954 million) this fiscal year as it aims for a...
The headquarters of German lender IKB Industriebank AG are seen in Duesseldorf, western Germany, in this July 30, 2007 file picture. IKB, hit by its exposure to the U.S. subprime lending crisis, expects...   (Associated Press)
People pass a Citibank office on Tuesday, Nov. 27, 2007 in New York. The Abu Dhabi Investment Authority will invest $7.5 billion in Citigroup, offering the nation's largest bank needed capital to offset big losses from mortgages and other investments. (AP Photo/Mark Lennihan)
People pass a Citibank office on Tuesday, Nov. 27, 2007 in New York. The Abu Dhabi Investment Authority will invest $7.5 billion in Citigroup, offering the nation's largest bank needed capital to offset...   (Associated Press)
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Crisis rocks European banks
Knight Ridder

German firms shake off worries
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Money • World

 
Citigroup • Europe • subprime mortgages • Norway • banking • municipal bonds • IKB Deutsche Industriebank

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