The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

CDOs: Super senior is super bad

‘Riskless’ exposure comes back to haunt banks

Banks are facing far bigger write-downs on their ABS CDO business than first thought because they took on super-senior exposure that was supposed to be virtually riskless

There has been only one game in town in recent weeks as far as the structured finance market is concerned – and that is trying to put accurate numbers on just how big the final hit taken by banks from their ABS CDO businesses will be. The realization that early numbers put out by some banks could be wildly off has dawned in recent weeks – primarily since Merrill Lynch and Citi put out write-down figures that seemed an order of magnitude greater than anything that had been suggested before. Although Merrill and Citi were at the top of the league tables for underwriting CDOs, when they revealed potential billion dollar write-downs in the double digits it became clear that something else was afoot.

Comparing the hits that each bank is expecting is a frustrating business because of the inconsistency in their approaches. But the mere fact that the ABX indices have tanked during October (see chart) would suggest that any bank putting out figures in November rather than September would be expected to mark exposure down far more sharply than before.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree