July 4, 2007 (LPAC)--Losses announced on June 29, by Italease, an Italian bank, due to derivative bets, have sent shockwaves on the financial markets. Italease announced losses of up to $730 million on Credit Default Swaps contracted with larger players such as Societè Generale, PNB Paribas, and Deutsche Bank.

Italease bought CDS's on the eve of the wave of interest rate increases by the European Central Bank, and got caught in the leveraged spiral unleashed by the money crunch.

Italease's main shareholder is Banca Popolare di Verona e Novara (BPVN), with 30.72%; other shareholders include Credit Suisse with 5.30% and Antonveneta, a subsidiary of ABN-Amro, with 3.65%.

In a discussion with EIR , an analyst from one of Italy's largest banks wondered how could the Italease people be so stupid to do that. "We have been warning about ECB rate increases in our weekly bulletins at least since the beginning of the year."

In further comments, the source referred to a recent report issued by Mediobanca, singling out European banks as being more exposed in derivatives than US banks. Among the top nine banks most exposed in derivatives, six are European: Deutsche Bank, Barclays, BNP Paribas, UBS, Royal Bank of Scotland, and Credit Suisse Group.

The credit derivatives bubble is one of the many speculative bubbles, like the sub-prime mortgage bubble, currently exploding on the world financial system as a consequence of the end of the yen carry trade, the supply of cheap money to the gambling casino called the world financial system.