In a further sign of the deepening global credit crisis, Sweden's Handelsbanken said Monday that it is closing its proprietary trading in foreign exchange and fixed-income securities in New York and that it has divested a significant part of its exposure to U.S. asset-backed securities.
At the end of 2007, Handelsbanken's exposure to asset-backed securities secured by credit card receivables stood at about $1.85 billion.
So far Scandinavian banks have avoided the huge writedowns that European and U.S. banks have made and have maintained solid balance sheets without having to turn to foreign sovereign wealth funds for fresh capital.
But Handelsbanken's announcement could indicate that Scandinavian banks were harder hit by the credit crisis than previously thought.
"It shows how serious it is over there," Cheuvreux analyst Rodney Alfven said of the U.S. asset-backed securities market. Despite the "pitch-dark" market, "they chose to sell."
