An RBS credit research note circulated earlier to clients noted that banks have so far taken $25.7bn in writedowns against their monoline exposure.
That is, writedowns on the market value - or effectiveness - of CDS as insurance contracts against existing gross holdings of ABS CDOs.
How much though, is left to writedown? Monolines have insured $100bn of ABS CDOs.
So far too, the deepest writedowns against monoline insurance have been taken as a result of the downgrading of FGIC, SCA and CIFG. But between the three of them, they only insure around $39bn.
MBIA and Ambac between them insure $60bn, and of course, having only recently been downgraded, they have yet to impact bank earnings.
In a credit strategy note sent to clients on Monday, Bank of America tots up the monoline markdowns, or CVAs - credit valuation adjustments - made so far:
Merrill Lynch, note, has taken the steepest CVA, since it was so heavily exposed to SCA and ACA. With MBIA and Ambac now looking precipitously close to going the way of the other monolines, banks may end up having to double their existing 20-30% CVAs taken so far.
All that on top of continuing writedowns to the underlying CDO portfolios themselves.
Related links
When the bond insurers finally go… - FT Alphaville
Les menaces monolines - FT Alphaville
