LONDON, Nov 16 (Reuters) - The credit market turmoil of 2007 has seen banks register writedowns and losses totalling more than $50 billion and experts see no sign of let up this year.
Following is a timeline of events:
* Q4, 2006 - U.S. housing market slows after 2 years of increases in official interest rates. Delinquency rates on subprime loans rise, leading to a wave of bankruptcies at subprime lenders. Interest rate spreads on Collateralised Debt Obligations, repackaged bonds and loans which included subprime mortgage debt, widen sharply in December, 2006 and January, 2007.
* 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 tranches of home equity CDOs widen more than 200 basis points in the two days that follow.
* Feb 27 - Global equities plunge as jitters about U.S. housing combine with 10 percent drop in China’s main stock index.
* June 20 - Two Bear Stearns-managed hedge funds BSC.N 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.
* 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 Inc (HD.N) and D.R. Horton Inc (DHI.N) issue warnings about the housing market. Credit spreads measured by the iTraxx Crossover index, a widely-watched barometer of credit sentiment, jump 20 basis points to 270 — up almost a percentage point from record lows under 188 basis points on June 1.
* July 17 - Bear Stearns says two hedge funds with subprime exposure have very little value; credit spreads soar.
* July 19 - S&P slashes ratings on some top-rated mortgage bonds by eight notches.
* July 26 - Credit spreads leap above 380 bps as loan deals for key leveraged buyouts such as of Alliance Boots are put on ice.
* July 30 - German industrial bank IKB IKB.DE cuts earnings targets for 2007/08, citing losses related to U.S. subprime. iTraxx balloons to record highs above 500 basis points
* July 31 - American Home Mortgage Investment AHM.N said it may have to liquidate assets, fuelling concerns about a spill-over of subprime losses into other areas.
* Aug 7 - U.S. Federal Reserve leaves interest rates at 5.25 percent, saying economic growth remains moderate despite tighter credit and inflation risks remain its main concern.
* Aug 9 - European Central Bank adds 94.8 billion euros of one-day funds to money markets as interbank lending dries up amid concern about banks’ subprime exposure and after overnight borrowing rates surge to 4.6 percent. The move followed news from French bank BNP Paribas (BNPP.PA) that it froze $2.2 billion worth of funds, citing subprime problems. The Fed and Bank of Canada also add liquidity to their banking systems. Germany’s Bundesbank organises a meeting to rescue IKB. German regulator Bafin said it was looking into a $17.5 billion special funding vehicle of German state bank SachsenLB, raising concerns about other bank conduits and bank-sponsored structured investment vehicles heavily dependent on easy short-term finance
* Aug 17 - U.S. Fed surprises markets by cutting its discount rate for direct loans to banks by half a percentage point to 5.75 percent, saying downside risks to growth from tightening credit markets had increased appreciably. World stock markets surge from 5-month lows. SachsenLB said German savings banks had provided a credit facility of 17.3 billion euros to secure the liquidity of its Ormond Quay conduit.
* Aug 21 - Britain’s Barclays Bank (BARC.L) borrows 314 million pounds from the Bank of England’s standing lending facility, the first use of the penalty rate facility since the credit crisis began. Barclays taps the central bank for emergency funds of some 1.6 billion pounds for a second time on Aug. 30, citing a technical hitch in the UK clearing system.
* Sept 6 - ECB leaves interest rates at 4.0 percent, seen as at least a postponement of the increase it had appeared to signal in early August.
* Sept 13 - British mortgage lender Northern Rock NRK.L sought emergency financial support from the BoE, according to news reports. The report and its confirmation spark a run on the bank’s deposits by worried savers in the days that follow.
* Sept 17 - British finance minister Alistair Darling says the government will guarantee all deposits at Northern Rock
* Sept 18 - U.S. Fed cuts its key Federal funds target rate and discount rate by half a percentage point to 4.75 percent and 5.25 percent respectively, saying the cuts were a pre-emptive move to neutralise the impact of the financial market turmoil on the broader U.S. economy. World equity and credit markets rally.
* Sept 18-20 - U.S. investment banks start reporting third-quarter earnings, with mixed overall results. Goldman Sachs (GS.N) recorded $1.71 billion in losses in leveraged loans earmarked for buyout.
* Sept 24/25 - The International Monetary Fund’s Global Financial Stability report says credit problems will recur and the tightening of credit will slow the world economy. Group of Seven’s Financial Stability Forum says a “period of adjustment” may take some time.
* Sept 27 - ECB announces it lent out 3.9 billion euros ($5.5 billion) at its penalty rate of 5 percent on Sept 26 but it declined to say which bank or banks needed the extra funds.
* Oct 1 - Swiss bank UBS AG UBSN.VX said it would write down $3.4 billion in its fixed-income portfolio and elsewhere, and record its first quarterly loss in nine years. Citigroup (C.N) said it was expecting a fall of about 60 pct in third-quarter net income.
* Oct 15 - Bank of America (BAC.N), Citigroup (C.N) and JPMorgan Chase & Co (JPM.N) announce plans to set up a fund aimed at buying and pooling assets from stressed SIVs in order to prevent a fire sale of these assets undermining global credit markets further. The fund was expected to be worth about $80 billion and will issue asset-backed commercial paper to finance its purchases. Separately, Citigroup announces $6.5 billion of losses and writedowns on subprime-related debt and leveraged loans in Q3 registering its largest quarterly profit decline in three years.
* Oct 24 - Merrill Lynch MER.N announces $8.4 billion of losses and writedowns in CDOs, subprime and leveraged loans in Q3 — leading to the biggest quarterly loss in the firm’s history and the ousting of Chairman and Chief Executive Stan O’Neal on Oct. 30.
* Oct 31 - Fed cuts key Fed funds target rate and discount rate by a quarter percentage point each to 4.5 percent and 5.0 percent respectively, saying the economy is likely to slow as the housing market correction intensifies
* Nov 4 - Citigroup announces a further $8-11 bln of subprime-related writedowns and losses. Charles Prince resigns as Chairman and Chief Executive.
* Nov 5 - Fitch says it may cut the AAA credit ratings of bond insurers, raising concern that such action could trigger a wave of downgrades of some of the $2.5 trillion of bonds they insure
* Nov 7 - Dollar slide on foreign exchanges accelerates as traders bet the Fed will continue to opt for further rate cuts if the housing and credit crisis deepen. The euro sets record high above $1.47, sterling sets 26-year highs above $2.10.
* Fed data shows outstanding asset-backed commercial paper recorded its biggest weekly decline in two months, dropping a massive $29.5 billion to $845.2 billion in the week ended Nov. 7.
* Nov 13 - Bank of America Corp becomes the latest financial firm to use its own cash to prop up faltering money market funds. This raises concern about the need for further bailouts as the implicit promise of money funds to preserve investor capital is threatened by losses in asset-backed commercial paper markets.
* Nov 15 - Fed pumps $47.25 billion in temporary reserves into the banking system in its biggest combined daily injection of cash funds since shortly after the September, 11 2001 attacks. Wholesale money markets tighten everywhere as bank losses mount and amid year-end liquidity concerns.
For a factbox on the rolling like of major writedowns and losses at global banks announced since: see [ID:nN12464660]