Wall Street banks are working on plans to separate troubled assets from the rest of their businesses in an effort to ring-fence problems and restore investors’ confidence in the financial sector.
A number of US firms are looking to follow the example set by UBS, which this week put securities linked to US mortgages into a separate subsidiary with a view to eventually reducing its exposure to the troubled assets, which have been responsible for more than $30bn of losses so far.
The Wall Street banks’ plans, which are yet to be finalised, would enable banks to move at least some troubled assets off their balance sheets by selling large stakes in the funds to outside investors.
Lehman Brothers, which has been forced to deny rumours about its financial health over the past few weeks, is believed to be one of the banks considering a spin-off, or sale, of some of its assets.
“We want to continue to move illiquid assets off the balance sheet,” Erin Callan, chief financial officer, told CNBC this week. The bank declined to comment further.