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.
Reuters News is producing a package of stories analyzing the impact of the credit crunch on consumers, policymakers and investors around the world.
Below is a timeline of events.
* 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 Collateralized Debt Obligations, repackaged bonds and loans which included subprime mortgage debt, jump 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 grade tranches of home equity CDOs widen more than 200 basis points in two days that follow.
* June 6 - European Central Bank raises key interest rates by a quarter point to 4.0 percent.
* 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.
* July 5 - Bank of England raises key interest rates by a quarter percentage point to 5.75 percent.
* 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.
* 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.
* July 30 - German bank IKB IKB.DE cuts earnings targets for 2007/08, citing losses linked to U.S. subprime. Credit spreads balloon to record highs above 500 basis points.
* Aug 7 - U.S. Federal Reserve leaves interest rates at 5.25 percent, saying economic growth remains moderate despite tighter credit conditions and that inflation remains its main concern.
* Aug 9 - European Central Bank adds 94.8 billion euros of one-day funds to money markets as interbank lending seizes up amid concern about banks subprime exposure and surging overnight borrowing rates. ECB move comes after French bank BNP Paribas froze $2.2 billion worth of funds, citing subprime problems. Fed and Bank of Canada also add liquidity to their banking systems. Germany’s Bundesbank organizes meeting to rescue IKB. German regulators say they are looking into $17.5 billion funding vehicle of German state bank SachsenLB, raising concerns about bank conduits and bank-sponsored structured investment vehicles heavily dependent on short-term finance.
* Aug 17 - Fed surprises markets by cutting discount rate for direct loans to banks by half a percentage point to 5.75 percent, citing downside risks to growth from tightening credit. SachsenLB said German savings banks provide credit facility of 17.3 billion euros to secure liquidity of its Ormond Quay conduit.
* Aug 21 - Britain’s Barclays Bank (BARC.L) borrows 314 million pounds from Bank of England’s standing lending facility, the first use of that penalty rate facility since credit crisis began. Barclays taps central bank for emergency funds of some 1.6 billion pounds for a second time on August 30, citing a technical hitch in UK clearing system.
* Sept 6 - ECB leaves interest rates at 4.0 percent, widely seen as postponement of rate rise it had signaled in August.
* Sept 13 - British mortgage lender Northern Rock NRK.L seeks emergency financial support from the BoE, according to TV news reports. Report and its confirmation spark a run on bank’s deposits by worried savers in days that follow.
* Sept 17 - British finance minister Alistair Darling says UK 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 neutralize the impact of the financial market turmoil.
* Sept 24/25 - International Monetary Fund says sustained tightening of credit will slow the world economy.
* 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 funds.
* Oct 1 - Swiss bank UBS AG UBSN.VX said it would write down $3.4 billion of assets and record its first quarterly loss in nine years. Citigroup (C.N) said it expected third-quarter net income to fall by about 60 percent.
* Oct 15 - Bank of America (BAC.N), Citigroup (C.N) and JPMorgan Chase & Co (JPM.N) float plans to set up a fund aimed at pooling assets from stressed SIVs and preventing a fire sale of these assets undermining credit markets further. After months of discussion the plan never gets off the ground.
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 biggest quarterly loss in the firm’s history and the exit of Chief Executive Stan O’Neal on October 30.
* Oct 31 - Fed cuts key Fed funds target and discount rates by quarter percentage point each to 4.5 percent and 5.0 percent respectively, saying economy to slow as housing weakens further.
* Nov 4 - Citigroup announces further $8-11 billion of writedowns. Charles Prince resigns as Chief Executive.
* Nov 5 - Fitch says it may cut the AAA credit ratings of bond insurers, raising concern such action could trigger a wave of downgrades of some of the $2.5 trillion of bonds they insure.
* Nov 7 - U.S. Dollar slides as traders bet Fed will slash
rates further to stem crisis. Euro sets record high above $1.47, sterling sets 26-year highs above $2.10.
* Nov 13 - Bank of America props up its faltering money market funds. Concerns grow about the need for further bailouts as implicit promise of money funds to preserve investor capital is threatened by losses in asset-backed commercial paper.
* Nov 15 - Fed pumps $47.25 billion in temporary reserves into the banking system in its biggest combined daily injection of cash funds since aftermath of September, 11 2001 attacks.
* Dec 6 - U.S. Treasury, together with mortgage industry, announces plans to slow a wave of U.S. mortgage foreclosures, including interest rate freezes on mortgages facing big jumps in reset borrowing rates. Bank of England cuts key interest rate by a quarter percentage point to 5.5 percent.
* Dec 11 - Fed cuts key interest rates by a quarter percentage point to 4.25 percent and 4.75 percent respectively.
* Dec 12 - Major central banks, including Fed, ECB, BoE and Swiss National Bank, unveil coordinated plan to provide liquidity to banking system over yearend period. Plan includes opening dollar swap lines between the Fed and ECB/BoE/SNB and the latter holding auctions of U.S. dollars for their local banks — so-called Term Auction Facilities (TAF).
* Dec 19/20 - Bond insurer MBIA reveals some $30.6 billion exposure to complex mortgage securities, forcing Fitch to say it may downgrade its AAA rating and unnerving investors in U.S. municipal bonds — many of which are guaranteed by the insurer.
* Jan 3, 2008 - Fed raises TAF auction amounts to $30 billion from $20 billion for each of two auctions in January.
* Jan 22 - In rare action between scheduled meetings, Fed slashes fed funds target rate by three-quarters of a percentage point to 3.5 percent — the largest single rate cut in 23 years. The move followed the biggest one-day loss on world stock prices in almost six years. Two days later, French bank Societe Generale revealed fraud by a single trader caused it to lose $7.1 billion — the biggest ever rogue trade loss.
* Jan 30 - Fed cuts funds rate by another half a percentage point to 3 percent — brings cuts to 125 basis points in eight days.
* Feb 7 - BoE cuts UK interest rates by quarter percentage point to 5.25 percent.
* Feb 8 - German state-owned bank WestLB receives a further 3 billion euro rescue package from the state of North Rhine Westphalia, bringing to 5 billion euros the total cash bailout.
* Feb 13 - President George W. Bush signs into law a $168 billion two-year stimulus package.
* Feb 17 - UK government announces the nationalization of Northern Rock.
* March 7 - Fed says it would start a series of term repurchase transactions with primary dealers expected to be worth a total of $100 billion. This is linked to a series of other measures to add more funds to the banking system.
* March 11 - Fed says it will accept broader range of collateral, including home mortgages, in new securities lending program (Term Securities Lending Facility). It said it will lend up to $200 billion to primary dealers, secured for 28 days. Fed action is coordinated with steps ECB, SNB and Bank of Canada.
* March 14 - Fed provides emergency financing to Bear Stearns via US bank JPMorgan, the first bailout of a broker since Great Depression of 1930s. Bear Stearns share price had plunged about 50 percent earlier that day as concern about its solvency intensified and stock closed at $30.85 per share.
* March 16 - JPMorgan says it will buy Bear Stearns for about $2 a share in an all-share deal, with the Fed agreeing to fund up to $30 bln of Bear Stearns’ less liquid assets. The deal eventually closes on May 29 at a value of $9.32 a share. Fed cuts discount rate to 3.25 percent from 3.5 percent.
* March 17 - Bank of England makes emergency offer of 5 billion pounds of three-day loans, which is nearly five times subscribed. Two days later UK financial authorities make rare statement to calm markets, saying they not aware of problems at any UK bank.
* March 18 - Fed slashes fed funds rate by further three quarters of percentage point to 2.25 percent, lowest since 2005.
* March 19 - U.S. regulators of government-sponsored mortgage firms Fannie Mae FNM.N and Freddie Mac FRE.N ease capital requirements for the two firms to provide up to $200 billion in immediate liquidity for stressed mortgage markets.
* April 1 - Swiss bank UBS announces further $19 billion in debt writedowns, bringing its total to date to $37 billion — the biggest hit of any bank worldwide. UBS Chairman Marcel Ospel quits.
* April 10 - Bank of England cuts key interest rate by a quarter of a percentage point to 5.0 percent.
* April 21 - Bank of England announces plan to swap banks’ risky mortgage assets for at least 50 billion pounds of government debt — the so-called Special Liquidity Scheme.
* Fed cuts Fed funds rate by a quarter point to 2.0 percent, bringing cumulative cuts in its key interest rate to 325 basis points in little over seven months.
* July 3 - ECB raises key interest rates by a quarter point to 4.25 percent.
* July 13 - Fed authorizes Fannie Mae and Freddie Mac to borrow from its discount window as necessary for emergency funding. Any lending would be collateralized by U.S. government and agency securities. Fed also agrees to take on a consultative role in setting capital requirements and financial safety and soundness standards for the two companies.
* July 30 — Fed announces series of measures extending support and liquidity injections to the banking system, including an increase in swap lines with ECB and SNB through January 2009. Fed measures include extending direct lending to investment banks through January 2009 (the Primary Dealer Credit Facility) and introducing an auction of options on for primary dealers to borrow from Term Securities Lending Facility.