Thursday January 22, 07:37 PM
Global banking losses to hit 3.6 trillion dlrs: Roubini
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WASHINGTON (AFP) - The financial crisis may lead to 3.6 trillion dollars in losses and writedowns for the global banking sector, an economist who was among the first to predict the meltdown said Thursday.
Nouriel Roubini, a New York University economist dubbed "Dr. Doom" for his longstanding pessimism, indicated the losses could be far greater than the 1.0 trillion dollars already recognized by banks worldwide.
The projected losses means the US banking system is "borderline insolvent," said the economist, who predicted a crisis and collapse in housing as early as 2006.
In an analysis released on his RGE Monitor blog, Roubini and analyst Elisa Parisi-Capone projected global losses of 1.6 trillion dollars on 12.37 trillion in unsecuritized loans. About 1.1 trillion of the amount will be incurred by US banks and brokerages.
Another two trillion dollars will have to be written off by the reduced value of financial holdings currently estimated at 10.84 trillion dollars. US banks and brokers will likely suffer losses of 600 billion to 700 billion of this amount.
As a result, the total financial system losses will likely hit 3.6 trillion dollars, half of which wil be borne by US firms, Roubini said.
Roubini said these losses would overwhelm the US financial system, which had a capitalization of 1.3 trillion dollars in commercial banks along with 110 billion in investment banks as of the third quarter of 2008.
Even with US government and other capital injections, the loss outlook "still leaves the US banking system borderline insolvent if our loss estimates materialize," Roubini and Parisi-Capone wrote.
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