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Many of us might be wondering as Sub prime crisis has occurred in the US, then why its impacts are being seen on all over the world. To describe it in brief, it can be said that the investors who have bought these MBS (Mortgage Backed security) are spread all across the world. Therefore, the huge amount of money they had invested in buying these MBS hoping for a very good return didn’t happen and they were unable to realize even small marginal return on these MBS. Incurring huge amount of losses the initial steps taken by few banks and financial institution during beginning of the crisis (Aug, 07), clearly indicates the impact of the same.

The French bank BNP Paribas froze three of its funds, worth a total of around $2.75 billion, exposed to the sub prime sector. On the same day, NIBC, a midsize Dutch bank, said the sub prime had contributed to a $189 million loss in one of its U.S. investment books in the first half of the year. And, dodgy real estate loans have made a big dent in forecasted earnings this year on German lender IKB.

Keen to limit risk in this kind of financial atmosphere, European banks have taken to hoarding their cash, nudging up the rate they charge to lend money to each other. Worries that caution would make it tough for banks to borrow forced the European Central Bank to mobilize.

The Frankfurt-based ECB, which sets monetary policy for the entire euro zone, loaned the region's banks a record $130 billion. And it's not the only central lender with jitters. Similar concerns prompted Japan's main bank to pump a trillion yen — more than $8 billion — into its money market. The U.S. Federal Reserve and Australia's central bank have both made similar moves.

The ECB may have had no choice but to step in, but dramatic swoops like that have a habit of spooking the markets. Sure enough, major indexes in Europe and Asia skidded with investors seeking the safe haven of government bonds. The question most market participants want answered: how much more bad debt is out there? Unfortunately, no one really has a clue.

While it's a good thing that debt these days gets distributed around the world, meaning thereby more institutions could be hit than might otherwise. Thus, the impact of sub prime mortgage can be easily seen all over the world.

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