Fitch Ratings said in a new report that while a number of banks have varying degrees of exposure to ABCP (asset-backed commercial paper) programmes, Fitch believes that for the majority of institutions, potential exposures are manageable, both from a funding and a capital perspective.

"The most vulnerable banks continue to be those with large conduits relative to asset size and a reliance on wholesale funding," says Ian Linnell, Managing Director of the EMEA Financial Institutions Group at Fitch Ratings in London. "Also, while potential conduit exposures are manageable for the majority of institutions, earnings for a number of banks are likely to come under pressure, especially for those with substantial investment banking operations. Clearly, the extent of any deterioration will depend upon how long the current adverse market conditions persist."

The total ABCP market was estimated to have outstanding amounts of USD1.4trn at the end of March 2007, comprising USD1.15trn of US ABCP and USD0.3trn of Euro ABCP. Some USD511bn was held in European conduits and USD890bn in US conduits as of end-July, Fitch estimates.

"Fitch's bank-by-bank analysis for major liquidity providers indicates that most banks have the capital cushion to absorb these draw-downs on their balance sheet," says James E. Moss, Managing Director of the US Financial Institutions Group at Fitch Ratings in Chicago.

For some of the smaller banks, given the size of their conduits in relation to their existing capital base, capital ratios will come under pressure. However, the reconsolidation of all conduits remains an extreme worst-case scenario.