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BNP Paribas

What is it?

BNP Paribas is the biggest bank in France, and one of the biggest banks in Europe.

What’s it got to do with the financial crisis?

Along with Bear Stearns’ hedge funds, BNP Paribas was the institution which blew the whistle on the credit crunch. In August 2007 it unexpectedly froze three of its funds (ie, said no one could take any money out of them) with a value €1.6bn. Why? BNP said no one wanted to buy the financial products the funds were invested in and that it was therefore unable to work out how much they were worth. Those financial products were ABS related to sub-prime mortgages.

As a result, the world finally woke up to the fact that the huge market for mortgage backed securities and CDOs was in crisis. With no one trusting or wanting to buy the products any more, all the banks holding assets related to them would have to seriously revise their value downwards.

Last updated on 26 September 2008.

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