Guardian.co.uk – Hedge funds and banks are expected to bear the brunt of derivative losses estimated at $15bn (£9.4bn) linked to the collapse of Iceland’s three major banks – Landsbanki, Glitnir and Kaupthing – which failed in rapid succession last month.

The complex unwinding of trades linked to debt issued by the banks began yesterday with a settlement auction to determine the payout price on credit default swap (CDS) contracts – insurance taken out against the risk of debts going bad – for Landsbanki.

Payouts on all three banks are expected to be some of the largest ever seen in the $54.6tn CDS market – greater than those relating to Lehman Brothers, whose collapse triggered the meltdown of the global financial system.

The high settlement prices for Icelandic bank CDSs will be a blow to hedge funds, banks and other derivative traders who insured the debt.

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Guardian Unlimited – The threat of further redundancies hung over the City last night as it emerged that the investment bank Goldman Sachs is expected to cut at least 600 jobs in London. A wide-ranging cull of hedge funds in the capital was also predicted as the fallout from the banking crisis spread to vulnerable sections of the finance industry.

Goldman plans to cut 10% of its worldwide workforce to reflect the worsening economic conditions. It has about 6,000 staff in London. Sources close to the company said no decision had been taken on which countries or business lines would take the brunt of the cuts, but there was an expectation all operations would be hit.

Recently bailed out by the US government and a $5bn (£3bn) injection from the investor Warren Buffett, Goldman has seen many of its most lucrative business areas, including debt financing for mergers and takeovers, in effect closed down.

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