Sky News business editor Michael Wilson

HSBC heads the list of the credit crunch casualties with a hit of some £8.7bn from its frontline exposure to the sub-prime mortgage crisis in America.

This was softened a bit by its better than expected pre-tax profits – but do we really care?

A few billions here or there on the books of Britain's biggest bank are important but not crucial.

The real question to ask is whether or not these recent 'writedowns' in the banking sector are the end of the story.

Two things say no. First the market sold off more banking stocks today as a leading European bank, Credit Suisse, warned of more losses from one of  its peers, UBS.

Rivalry apart, the view that there's plenty more grief to come is shared by Wall Street whose stock market serves the world's biggest economy. On Friday the Dow Jones fell just over two and a half per cent.

Secondly, gold's on the way up to $1000 an ounce, rising to $982, seven dollars higher than Friday. Gold glisters when fear erodes the value of other investments. It's a sure sign of real worry.

I'm concerned that even the main players have little idea of what dangers still lurk.

Behind the market figures, there is intense anger with the whole of the sorry debt debacle, and a growing suspicion that the boardroom had little idea what the shopfloor was doing.

One of HSBC's major shareholders is demanding that the bank ditches its whole U.S. sub prime business, which it argues taints HSBC's image as sophisticated organisation.

Well that's as maybe, but closer to home, consider the lambasting that our own Commons Treasury Select Committee has given today to the financial sector and its supposed watchdog system.

Its chairman, John McFall said that 'the best and brightest at our top investment banks have expended great energy designing ludicrously complex financial instruments which you would need a Nobel Prize to understand.'

He said the banks ignored the warnings of the looming credit crunch and continued 'in the mistaken belief that the good times would go on and on'.

Twelve years ago, the unthinkable happened, when a City scion, Barings, collapsed – mainly because the senior management didn't understand the complex financial systems its underlings were constructing, and how easily it would be for a junior, speculative trader to entangle himself and then disintegrate the whole edifice.

As the fall out from the credit crunch continues, it's increasingly clear that the lessons from that Nick Leeson's  shambles have not been learnt.

The financial sector will always try to  find cleverer and more complex ways to make money. That is its job.

But much more important is that the complexities and the risks are clearly understood, by everyone involved – and that we are clearly informed, as well.

Comments

[Marc w 12 Mar 2008 21:41:29]

The budget always goes to the working or homeowner class! Not to these lay abouts that don't do any thing all day, and expect social to pay for it! You only have to see Jermey Kile to get some of the picture, but when you are out there doing these council flats for these degenerates, it is a more down to earth story, example the smell, they are dirty,Alcholics, and ripe with drugs! And so what are the goverment going to do about that? Nothing!b And who pays for their keep sake?

[Ali 3 Mar 2008 20:52:03]

How come HBOS, who took the smallest sub prime related hit (just £227m) of all the major banks and still made nearly £5.5bn profit is getting it's share price hammered? Meanwhile, others who lost literally billions seem to still be in favour. Seems the markets love sensationalism and not steady, well operated financial institutions.

[David London 3 Mar 2008 17:47:02]

Each day we here of another bank making $ or £ Xbn losses on US Sub Prime lending. Does any one know how much it all adds up to?

Just with HSBC £8.7bn = $16bn (say) Assuming a loss of $50,000 on each reposession thats 320,000 homes repossessed to account for just the HSBC loss.

Am I missing something? as I find it very hard to beleive the figures for what must be the toal repossessions.

[Purps, Chelmsford 3 Mar 2008 15:58:13]

Why run the negative, the fact is the UK banks and HSBC made very good profits for 2007.

My only concern is that they should retain those profits and bolster their capital positions, instead of raising dividends.

As long as their is choice people can move bank accounts, although I still believe the government missed a trick, they should have created a Post bank and incorporated Northern Rock into it used the Post office network to create a full branch service bank for the people and floated it off retaining a golden share.

That would have turned the negative into a positive.

[Khalid 3 Mar 2008 13:32:58]

Sir
Whether the Bank be known as the HSBC or RBS, banks have long manipulated the finances of individuals for self gain, raising and lowering market fears as they please.
So, do I care NO.
The banking problems, being further exasberated by the FSA'failure to provide consumer stability leave [Cheryl Lynn] with no choice but to say oooh you make my [Love Come Down] and as such the sooner the banks are bought in line with utilities the better it will be for consumers as I can't wait for the day for bank charges to fall below the £5 mark. Other than that, things will get better, so no panic.