BNP Paribas to unblock suspended funds
French banking giant BNP Paribas said on Thursday it plans to unblock three of its investment funds, whose suspension earlier in the month sparked turmoil on global stock markets.
By Agencies |
PARIS: French banking giant BNP Paribas said on Thursday it plans to unblock three of its investment funds, whose suspension earlier in the month sparked turmoil on global stock markets.
On August 7 BNP Paribas suspended the funds, which had made investments linked to risky US subprime home loans, because of difficulties in valuing them. In a statement the bank said the “conditions had been met” for valuing them and that the funds would be unblocked on August 28 and 30. “BNP Paribas Investment Partners has drawn up a methodology allowing, as it committed itself at the outset to do, to resume the process of subscriptions and redemptions,” the subsidiary said.
The funds BNP Paribas ABS Euribor and BNP Paribas ABS Eonia will be unblocked on August 28, while Parvest Dynamic ABS will be unfrozen on August 30, the bank said.
The funds hold asset-backed securities (ABS), complicated financial instruments that are linked to “subprime” borrowers with poor credit histories in the US. Defaults by these borrowers have led to losses for many banks and investment funds and appetite for asset-backed securities linked to subprime loans has dried up. This led BNP Paribas to declare a total lack of liquidity in the market for ABSs, which meant it was impossible to value the assets.
The value of the total assets under management by the funds had dropped between July 27 and August 7 from around e2billion to e1.6 billion partly due to withdrawals by investors. There have been jitters about the potential fallout for the world economy from problems in the US subprime lending sector. BNP’s announcement added to those fears and followed a similar decision by the German mutual fund Union Investment which froze one of its funds that has exposure to the US subprime market.
On August 7 BNP Paribas suspended the funds, which had made investments linked to risky US subprime home loans, because of difficulties in valuing them. In a statement the bank said the “conditions had been met” for valuing them and that the funds would be unblocked on August 28 and 30. “BNP Paribas Investment Partners has drawn up a methodology allowing, as it committed itself at the outset to do, to resume the process of subscriptions and redemptions,” the subsidiary said.
The funds BNP Paribas ABS Euribor and BNP Paribas ABS Eonia will be unblocked on August 28, while Parvest Dynamic ABS will be unfrozen on August 30, the bank said.
The funds hold asset-backed securities (ABS), complicated financial instruments that are linked to “subprime” borrowers with poor credit histories in the US. Defaults by these borrowers have led to losses for many banks and investment funds and appetite for asset-backed securities linked to subprime loans has dried up. This led BNP Paribas to declare a total lack of liquidity in the market for ABSs, which meant it was impossible to value the assets.
The value of the total assets under management by the funds had dropped between July 27 and August 7 from around e2billion to e1.6 billion partly due to withdrawals by investors. There have been jitters about the potential fallout for the world economy from problems in the US subprime lending sector. BNP’s announcement added to those fears and followed a similar decision by the German mutual fund Union Investment which froze one of its funds that has exposure to the US subprime market.
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Fear that other banks had been exposed to similar problems and that this could cause a credit squeeze led to sharp falls in stock markets worldwide.Download
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