Two monolines face legal action

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XL Capital Assurance and Financial Guaranty Insurance Company (FGIC) face legal action by three banks after cancelling insurance contracts they had written on asset-backed securities transactions. The lawsuits have raised further doubts over the future of monoline insurers, and come on the back of multi-billion dollar writedowns on their structured finance portfolios, downgrades and the erosion of their capital base.

Merrill Lynch filed a suit with the southern district court in New York against

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