Morgan Stanley’s recent problems associated with the unwinding of its MBIA hedges (see Macaskill on markets: Morgan Stanley derailed by monoline exposure, Euromoney April 2011) have raised questions over the extent of monoline exposure still lurking on the balance sheets of other banks. Although it must have seemed like a good idea at the time to take out insurance against what appeared to be the highly likely outcome of at least one monoline default during the last three years, the recent correction in monoline credit default swaps may have caught some other banks out.
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