“The dead bodies keep floating to the surface in the subprime credit market contagion, yesterday hitting France’s largest bank, BNP Paribas, and sending global equities into a swoon. The question going forward is whether the world’s regulators and central bankers know how to contain this incipient financial panic.
The European Central Bank took a sensible step yesterday, pumping €94 billion of short-term liquidity into the system. This lender of last resort role is appropriate for a central bank when credit markets seize up, as they did yesterday after BNP Paribas froze three of its asset-backed securities funds. Several other European banks have also reported losses from the subprime debt market, and amid so much uncertainty a surprise like the one at Paribas can all too easily trigger a full-fledged global run. Mr. Trichet’s job is to restore trust and confidence, which he did well yesterday.”
The auditor for BNP Paribas is PwC.