Beginnings of the credit crunch

LONDON (Reuters) - Credit market turmoil has hammered the global banking system, forced asset writedowns of more than a third of a trillion dollars to date, squeezed lending everywhere and initiated a sharp slowing of the world economy.

Below is a timeline of events.

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* Q4, 2006 - U.S. housing market slows after two years of rising official interest rates. Delinquency rates on U.S. subprime mortgages rise, leading to wave of bankruptcies at subprime lenders. Interest rate premia on Collateralised Debt Obligations, repackaged bonds and loans which included subprime mortgage debt, jump sharply in December 2006 and January 2007.

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* Feb 8, 2007 - HSBC says more funds will have to be set aside to cover bad debts in U.S. subprime lending portfolios. California's New Century Financial Corp -- the third largest U.S. subprime lender -- said it expected Q4 2006 loss. Spreads on non-investment grade tranches of home equity CDOs widen more than 200 basis points in two days that follow.

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* June 6 - European Central Bank raises key interest rates by a quarter point to 4.0 percent.

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* June 20 - Two hedge funds managed by U.S. investment bank Bear Stearns announce losses after making bad bets on securities backed by subprime loans. They sell $4 billion of assets to cover investor redemptions and expected margin calls. Merrill Lynch sells off assets seized from the funds.

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* July 5 - Bank of England raises key interest rates by a quarter percentage point to 5.75 percent.

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* July 10 - Credit ratings firm Standard & Poor's said it may cut ratings on some $12 billion of subprime debt. U.S. firms Home Depot (HD.N) and D.R. Horton (DHI.N) issue warnings about housing market. Credit spreads soar by full percentage point in 6 weeks from record low of 188 basis points hit on June 1.

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* July 17 - Bear Stearns says two hedge funds with subprime exposure have very little value; credit spreads soar. Two days later, S&P slashes ratings on some top-rated mortgage bonds by eight notches.