Next up - Credit Crunch Part 2

Just when you thought things couldn’t get any worse, the world’s leading credit rating agency is predicting things are about to get tougher still for the world’s banks…

An interesting report in the Guardian this morning highlights the concerns of Standard & Poor about the second half of 2008. The fall-out from the turbulence of the last few weeks means that the value of problem assets (e.g. houses in the US) will have fallen further, increasing the exposure of the banking system.

The Standard and Poor’s report said its estimate earlier this year of total credit crunch losses of more than $250bn had now risen to $378bn - and could double to nearer $500bn as house prices in the US continue to fall.

These losses will have to be funded someone - either from existing banking reserves or by raising new capital from the likes of the sovereign wealth funds. Having just gone through a capital-raising process, will the banks be able to pull the trick off a second time around? There has to be a doubt.