The tip of the legal iceberg

The volume of lawsuits assailing banks in the wake of the subprime crisis is staggering. Industry sources say we are facing five to 10 years of subprime-related litigation, but a more worrying notion is that by defining legal risk under operational risk Basel II has created a new transparency of legal risk that will require firms to make a step change in the way they handle it. Victoria Pennington reports

The fallout from the subprime crisis has resulted in huge writedowns for banks, but it has also created a tangled web of litigation. Every organisation involved in the subprime securitisation process - from the mortgage originators, appraisers and lenders to the trustees, underwriters, rating agencies and law firms - is exposed to some form of action.

In the US, where litigation is often seen as