The biggest US financial institutions reported a sharp increase to $610bn in so-called hard-to-value assets in the third quarter, raising concerns about the hidden dangers on balance sheets. So-called level-three assets, classified as hard to value and hard to sell, rose 15.5% from Q2, according to S&P’s market, credit and risk strategies group. Level-three assets have risen all year for most banks as they have found it virtually impossible to sell mortgage-backed securities and CDOs. The S&P study is based on regulatory filings by the biggest underwriters and traders of mortgage-backed securities and CDOs. These asset classes have plunged in value amid a wave of house price falls and foreclosures and are at the centre of the crisis. Next week, Goldman Sachs and Morgan Stanley are likely to be scrutinised for information about their holdings of opaque assets when they become the first banks to report Q4 results.

This entry was posted by Gwen Robinson on Thursday, December 11th, 2008 at 5:53 and is filed under Capital markets. Tagged with goldman sachs, morgan stanley. Edit this entry.