German banking system, causes for concern

The international financial system suffered fresh convulsions yesterday it emerged, that Germany’s IKB Deutsche Industriebank, one of the country’s leading small business lenders, had a huge exposure to high-risk sub-prime mortgages – mortgages which are made to borrowers with weak credit histories – in the United States. Defaults on these housing loans recently had reached a 10-year high, driving down the value of bonds backed by mortgages.

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