Credit

When it comes to the credit crisis that has been affecting everyone in the world many people are pointing their fingers at some of the major banks for being responsible. But many banks in the UK are denying their part in it and stated that the loss that was caused by US sub-prime mortgage deals was not a risky move on their part.

Directors from Citigroup, UBS, Deutsche Bank and Goldman Sachs said they could not have foreseen the credit crunch. But MPs said they were “in denial” about the scale of mounting losses. The banking industry’s financial exposure to US mortgage-related debt - whose value has plummeted as the housing market has slumped - runs into many billions of dollars. The heads of Merrill Lynch and Citigroup, two of the world’s largest banks, resigned last month after both revealed escalating losses from such investments.

But appearing before the Treasury Select Committee, bank bosses said these losses had been caused by wider problems in the US economy and not the banks’ actions. “The events we have seen over the last few months are the result of things which have happened in the economy….things which are not the fault of bankers.” said Lord Aldington, chairman of Deutsche Bank London.

MPs, who are looking into the state of financial markets in the aftermath of the Northern Rock crisis, said banks had become involved in “opaque” and “complex” trading in mortgage-related debt whose risks they did not understand. “It seems you are flying in the face of reality”, John McFall, Labour chairman of the committee, told them.