While we’re still not talking giant numbers, apparently Bank of China is set to disclose subprime-related writedowns 6x what was originally provionsed for by China’s largest bank. Instead of the $322-million it allocated last quarter, the bank is apparently set to disclose $2-billion in subprime losses.
Gosh, that squirrelly subprime stuff is just so darn hard to find, isn’t it fellas?
More seriously, as the WSJ points out, the deeper issue is the opacity of Chinese banks. No-one knows much about what they hold, even if most people feel confident that their direct subprime exposure is fairly low. That said, however, there are many other channels via which they could find themselves at the other end of the credit crunch — assurances, higher-than-expected prime, a China credit corollary, etc. — so let’s not start partying quite yet.