BNP Paribas, the eurozone's second biggest bank by market capitalisation, said the subprime crisis was preventing it from calculating the value of the asset-backed securities funds and barred investors from redeeming cash from them.
"The complete evaporation of liquidity in certain market segments of the U.S. securitisation market has made it impossible to value certain assets fairly, regardless of their quality or credit rating," it said in a statement.
"In order to protect the interests and ensure the equal treatment of our investors during these exceptional times, BNP Paribas Investment Partners has decided to temporarily suspend the calculation of the net asset value as well as subscriptions/redemptions, in strict compliance with regulations, for these funds," it added.
BNP Paribas said the three funds had declined rapidly in value in the past few weeks to 1.593 billion euros ($2.19 billion) at August 7, down from 2.075 billion at July 27. The bank has 326 billion euros under management.
BNP Paribas Investment Partners said the decision affected its Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia funds.
Valuation of the funds would resume as soon as liquidity returned to the market and, in the continued absence of liquidity, additional information on the envisaged measures would be given to investors within a month, the firm said.
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Subprime mortgages are the riskiest property loans, often extended to people who have payment difficulties or a bad credit history.