OECD raises subprime loss tally to $350-420 bln

By Brian Love

PARIS (Reuters) - The cost of the financial crisis caused by the collapse of the U.S. sub-prime mortgage market may be around $350-420 billion, and a $1-trillion figure floated by the IMF is misleading, OECD officials said on Tuesday.

The OECD, which until now was predicting a cost of $300 billion in losses and writedowns, said it had ceased using market price, or mark-to-market methods, and was instead using assumptions of ultimate recovery rates of 40-50 percent on asset values.

"Our considered view is the $1-trillion view is competely misleading," said Thomas Weiser, head of the Financial Markets committee of the Organisation for Economic Co-operation and Development.

The IMF said last week in a twice-yearly report on financial market stability that the fallout during the current crisis could hit almost $1 trillion.

Other OECD officials said the $1 trillion figure included lots of losses that were part of normal market life and not the sub-prime crisis per se, where a more focused International Monetary Fund estimate was for losses of $480 billion.

Weiser said "the one-trillion figure that the IMF has been bandying about" was discussed among others at a Monday meeting between OECD officials and representatives from banks, credit rating agencies and auditors.

"It's a bit artificial," said Weiser, who briefed a small group of reporters on discussions on the issue with banks and others on Monday.

The OECD reckoned its figure was realistic because it was no longer based on mark-to-market values, which in the current juncture put a value of zero on certain assets which would not ultimately be worthless, he said.