In an ironic twist to the sub prime crisis, the big Banks are grouping together in an attempt to develop a solution for Ambac Financial.  The irony is that the Banks used Ambac to hedge their original risk in the bond market.  I believe the several of the Canadian Banks are also engaged with Ambac.

Risk managers at Banks must be pulling their hair out, as new risk elements appear almost daily.

FT.com / In depth – Banks link to solve bond insurers crisis

The group looking at supporting Ambac includes Citigroup, Wachovia, Barclays, Royal Bank of Scotland, Société Générale, BNP Paribas, UBS and Dresdner. The members of the group, which is being advised by Greenhill, were understood to be the banks most exposed to the insurer. Credit Suisse is advising Ambac.

Ambac, which has lost its Triple-A rating by Fitch, needs to raise at least $1bn, analysts say.