Mumbai:
BNP Paribas, France''s biggest listed bank and one of Europe''s largest banks, has
frozen three of its investment funds worth 1.6 billion euros ($2.2 billion), citing
volatility in the US asset-based securities market. BNP
said the funds'' exposure to risky subprime loans in the US that have rattled financial
markets worldwide means the bank can no longer calculate their net value. The
frozen funds, however, account for less than 0.5 per cent of funds under management
for the eurozone''s second biggest bank by value. But
the bank is expected to have frozen a separate European fund valued at 750 million
euros, while a Dutch bank is reported to have pulled its planned new listing after
suffering subprime losses. The
developments came after Germany''s Bundesbank called a meeting of those involved
in the rescue of Europe''s highest profile subprime victim, IKB, and the European
Central Bank said it stood ready to act if needed to ensure smooth functioning
of markets. "The
complete evaporation of liquidity in certain market segments of the US securitisation
market has made it impossible to value certain assets fairly, regardless of their
quality or credit rating," BNP said in a statement. "BNP
Paribas Investment Partners has decided to temporarily suspend the calculation
of the net asset value as well as subscriptions/redemptions, in strict compliance
with regulations, for these funds," it said, adding "Valuation of the
funds would resume as soon as liquidity returned to the market and, in the continued
absence of liquidity, additional information on the envisaged measures would be
given to investors within a month." The
funds affected were Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas
ABS Eonia funds, BNP Paribas Investment Partners said. The
three funds had declined rapidly in size in the past few weeks to 1.593 billion
euros ($2.19 billion) at August 7, down from 2.075 billion at July 27. The bank
has 326 billion euros of assets under management, BNP Paribas said. Most
of the decline was due to investors pulling out of the funds, said Alain Papiasse,
head of asset management and services at BNP Paribas. BNP
Paribas said it was barring investors from redeeming cash from the funds. The
ECB, meanwhile, said it would provide quick liquidity at 4.00 per cent to bring
some calm to money markets. Subprime
mortgages are the riskiest property loans, often extended to people with payment
difficulties or a bad credit history. Several
major US firms have announced losses from exposure to these loans, causing a widespread
fall in stock markets. Traders
said that the BNP Paribas statement had helped cause a drop in European stock
markets. Euro-zone
government bond futures rallied on the news as stock markets slipped and European
credit markets gave up their early gains. German
bank Sal.Oppenheim said it had temporarily closed a 750 million-euro asset-backed
securities fund it managed for Austrian investment foundation Hypo KAG, and
Dutch merchant bank NIBC cancelled a flotation plan after revealing a 137 million
euro loss in losses on US asset-backed securities. Other
major financial services companies, however, said there was no undue cause for
concern over current market conditions.
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