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Global bank crisis deepens

Bank of America moved closer to a $15 billion (10 billion pounds) government capital injection and the U.S. Senate cleared the release of the remaining $350 billion of bailout funds amid new fears over credit losses at big banks.

 

Bank of Japan Governor Masaaki Shirakawa said on Friday the nation's financial conditions were tightening rapidly, sending a signal that world credit markets are under fresh stress despite central banks slashing rates and governments pumping funds into lenders.

British ministers were reported to be working on a new bank bailout plan and Ireland nationalised Anglo Irish Bank in a drastic move to save its third-largest lender from possible collapse. Bank of America and Citigroup were both due to release results later on Friday, having brought forward their reporting dates under mounting pressure from investors who question their ability to handle soaring bad debts as the recession deepens. "I think it's tremendously disappointing that the banks continue to flounder," said Carl Birkelbach, head of Birkelbach Management in Chicago. "What's going on here is that the first batch of the (financial bailout) funds was supposed to put out the fire, but now it looks like the fire is coming up again."

Economies such are the United States, Britain and Ireland, where soaring house prices fuelled a long-running credit boom, are expected to bear the brunt of a deepening global recession born out of a lending drought since widespread bank exposure to high-risk debt began to emerge in August 2007.


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