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Last Updated: Monday, 10 December 2007, 12:43 GMT
Societe Generale in $4bn bail-out
Market traders
The crisis in sub-prime debt has been felt in global markets
France's Societe Generale has become the latest bank to take a hit from the US mortgage debt crisis, bailing out a $4.3bn (2.1bn) investment vehicle.

Investors have become wary of putting their money in structured investment vehicles (SIVs), in case it ups their exposure to risky sub-prime debt.

Societe Generale will provide it with a credit line and take the assets onto its balance sheet, it said.

A string of banks have reported losses linked to the US debt crisis.

Earlier on Monday, Swiss investment bank UBS reported a further $10bn in asset write-downs from its exposure to bad US debt.

Hidden debt

Bonds backed by home loans, including sub-prime debt, account for 12% of the holdings of Societe Generale's SIV, called Premier Asset Collateralised Entity (PACE).

Standard and Poor's recently warned that PACE was close to breaching capital tests, which - if this happened - could trigger the appointment of a trustee to protect some debt holders.

"Due to current market conditions, Societe Generale has extended a liquidity facility designed to fully support the liquidity requirements of PACE, the sole structured investment vehicle that the group sponsors," it said.

"The group remains confident in the underlying quality of assets acquired," the statement added.

The crisis has its roots in the decision by US banks to lend money to people with poor credit histories.

This debt has since been packaged and sold to banks.

Now hidden in the financial system, bank wariness of exposure to these debts has made them reluctant to lend to each other and other investors wary of the financial sector.

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