Here we go again. Yesterday’s news of trouble at JP Morgan, America’s second biggest bank, is today matched by Royal Bank of Scotland, the UK’s second largest. RBS is another huge loser in the American subprime mortage market and is set to announce big writedowns next week.

RBS is understood to be seeking to raise capital from its shareholders in a rights issue thought to amount to £10 billion ($20bn), which is probably the biggest rights issue ever demanded in the UK.

The bank, which bought troubled NatWest and ABM Amro, has been running on low capital ratios for quite a while. It also has major exposure to subprime debt instruments. It has been linked with Spain’s Banco Santander for many years.

When such a major player is caught short like this, it brings home the extent and depth of the crisis in transatlantic financial markets, with all the knockon effects to the rest of the world.

Vince Cable, a spokesmen on Treasury matters who carries more weight than the Treasury these days, believes all the banks should follow the example of RBS, since they will need a great deal of liquidity from the Bank of England and that should be underwritten by shareholders, not taxpayers.

Next week’s announcement will be awaited with some trepidation.

If you are a small business owner, or work for one, you may like to read a post on how to cope with the likelihood of a forthcoming recession — even worldwide depression.

“Clearly, we’re in for the roughest of rides over the next two years, and possibly longer. Although interest rates are tumbling and will continue to do so, even in the eurozone, the increasing lack of liquidity around the world as banks horde cash, Scrooge-like, will permit little flexibility.”

Of course, some people get rich in the harshest of climates by betting on market falls. Given that it’s the new markets in financial instruments and derivatives that started this off in the first place, it’s ironic that some savvy souls will probably make billions out of other people’s misery.

Read the post in Small Business Booster.

The long-expected credit crunch linked to massive failure in the American sub-prime market really hit home yesterday.

The European Central Bank, regulator of the Eurozone group of countries, piled into the markets with $130 billion of cheap, emergency credit.

The move, the biggest central bank intervention since 9/11, came after reports that commercial lenders were desperately hauling back the supply of loans. The French giant BNP Paribas suspended withdrawals from three of its investment funds because of their exposure to the U.S. sub-prime market, saying “There has been a complete evaporation of liquidity” from credit markets, which could escalate into a worldwide credit squeeze.

Rumours were rife of impending fund meltdowns and banking collapses. Trevor Williams of Lloyds TSB said, “Liquidity has dried up basically. It’s a moment of panic.”

Nick Sparks, risk manager at F&C Partners, said, “People have got caught out. There will be more pain to come.”

You have been warned.

If you have a poor credit record, low earnings or have recently moved to another country, you may be classed as “sub-prime” by lenders if you apply for a loan or a mortgage.

There’s no escaping this Mark of Cain even if the only flaw in your situation is that you have recently taken a new job or become self-employed.

Banks and mutual lenders treat sub-primes in a straightforward fashion — with high interest rates. Indeed, the unfortunate sub-prime will often have to approach a specialist lender to negotiate their loan.

The recent falls in stock markets around the world were partly caused by a rise in sub-prime defaults in the U.S. following 17 rate hikes in two years. Many had taken out second mortgages to pay off other debts and were unable to meet repayments.

However, these cases should be set in perspective against a background of very low levels of mortage default in both the U.S and the UK.

If you think you may be assessed as sub-prime, try going to standard lenders first and explaining any mitigating factors. For example, that new job may represent a substantial increase in salary.

Should you be knocked back by the big boys despite the good news, the bad news is that you may have to bite the bullet and pay more than the average to get a mortgage.

Once the conditions that make you sub-prime have been relieved, however, you should remortgage at normal rates as quickly as you can.