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Global credit crunch may result in $1.2 trillion loss

A report by investment bank Goldman Sachs has revealed that global credit losses would reach $1.2 trillion, with the US financial institutions accounting for nearly 40%, or $460 billion of those losses.

The report said that leveraged institutions in the US, including banks, brokers-dealers, hedge funds and government-sponsored enterprises, have written off $120 billion losses since the credit crunch began in 2007.

The report said: US leveraged institutions have written off less than half of the losses associated with the bursting of the credit bubble. There is light at the end of the tunnel, but it is still rather dim.

Credit losses have prompted leveraged institutions to raise new capital of about $100 billion from domestic and foreign investors and decrease dividend payouts. This amount is more than three-quarters of the write-offs, according to the report.