Bank of China Ltd may reportedly own USD20 bn of debt given by Fannie Mae and Freddie Mac, investments amounting to approximately 2.6 per cent of all assets of the bank.
USD1 bn in securities may possibly link ICBC to two fraught U.S. home
loan companies, China Construction Bank owns USD7 bn and CITIC Bank
could own USD1.4 bn of agency debt, media reports. The
government-backed firms took a nose dive on NYSE as lack of confidence
from investors grew. Moody's Investors Service is said to have trimmed
down the lenders' financial strength ratings, citing credit losses may
put dividend payments on preferred shares at risk.
As most Chinese banks classify the holdings as available-for-sale or
held-to-maturity, they are unlikely to book a loss on their income
statements, and declines in bond prices in July won't affect first-half
earnings.
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