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Italian Bank Facing Huge Losses

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The losses still looked manageable at 225 million euros in December. They then jumped to 400 million euros by March, and then 600 million euros by early June, in a classic derivatives spiral, at which point the bank faced the choice of cutting its losses or risking disaster.

It appears the derivatives team were caught off-guard as the European Central Bank stepped up the pace of interest rates rises, hitting credits swaps sold as hedges to clients

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This has been discussed before. As I said: a good trigger for an acceleration of the deterioration of the financial markets

is always something "unexpected". For instance, common belief is that the EUR/EURO-zone is sort of a safe haven. But

then, who holds all this subprime cr@p? Regional European banks, life insurance companies, etc. With Spain and other

smaller countries looking increasingly shaky, we could be in for a European surprise.

So, say, something in Europe blows up big time. At the same time, no one believes in the USD anymore, the GBP is

a HPI-fuelled joke anyway. What will happen? There is still the Swiss Franc and the Yen who seem to be cheap.

Carry-trade unwind anyone?

Edited by Goldfinger

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