Credit markets: Why litigation is the next crisis facing the banking industry
Lawyers around the world are readying lawsuits to file against banks that sold toxic products to investors. Which types of deals are likely to be the subject of the biggest payouts? And how will banks pay for them?
Special focus: Banking 2008 and beyond
Post-crunch litigation: Lawyers look for sub-prime suspects
A welter of sub-prime and credit crunch related lawsuits have been filed or are being prepared. There is little surprise, since it has such a plaintiff-friendly system, that the US is leading the way. Those with the deepest pockets are being targeted. Alex Chambers reports on the implications.
MORE THAN A year has passed since the credit bubble burst and the true scale of damage is still unknown. The banking landscape is transformed as the securitization market becomes a wasteland. Every quarter brings additional disappointment as banks announce new write-downs in their credit books. Furthermore, the economic implications are becoming apparent as growth slows in the US and Europe.
And yet the reckoning is not just a financial one: increasingly regulators and authorities are announcing initiatives and rules designed to prevent any recurrence. Another blow to those who were involved in the origination, packaging, structuring and sale of sub-prime mortgages, and derivatives thereof is the appearance of hundreds of lawsuits. It is now the full weight of the law – mostly in the US – that is about to weigh on the former participants in this business.