Subprime, CDO Bank Losses May Exceed $265 Billion (Shenn, Mildenbank)

 Losses from securities linked to subprime mortgages may exceed $265 billion as regional U.S. banks, credit unions and overseas financial institutions write down the value of their holdings, according to Standard & Poor's.

S&P cut or put on review yesterday the ratings on $534 billion of bonds and collateralized debt obligations, many of which were rated as high as AAA. The action was the broadest by the New York-based firm in response to rising delinquencies among borrowers with poor credit. Moody's Investors Service and Fitch Ratings today said that they're also toughening assessments of the securities as home prices fall and the economy weakens.

While banks and securities firms such as Citigroup Inc. and Merrill Lynch & Co. accounted for most of the $90 billion in writedowns to date, S&P said the next wave may descend on regional U.S. banks, Asian banks and some large European banks. The ratings actions may create a ``ripple impact'' that further reduces debt prices, S&P said.

``There's a lack of confidence in the markets and this exacerbates that,'' said Anthony Davis, a banking analyst at Stifel Nicolaus & Co. in Florham Park, New Jersey. ``This will have a chilling effect on the markets.''

Read More: Bloomberg