Banks around the world play pass the parcel with £22bn worth of debt

Exposure Mystery over who owes what to whom.

WorldCom's £22bn debt mountain is affecting the books of at least 60 banks, 20 international companies, hundreds of fund management companies and some the world's biggest hedge funds.

As the search for any financial institution with a large exposure to the fraud-damaged telecoms company accelerated, industry analysts admitted that it was difficult to know exactly where the worst case was. Public information about the real owners of the £20bn of bonds issued by WorldCom and the £2bn of loans made to the Mississippi company is scarce, allowing rumours to circulate in the market about where the exposure lies.

This is because although the identity of the banking groups that have participated in the syndicates providing loans to WorldCom is readily available, most of the banks that join in the lending arrangements in turn sell off part of the debt to other financial firms.

It is this practice that makes it difficult to be sure precisely how much exposure Bank of America and Citigroup, two of America's biggest financial groups, have to WorldCom, even though they played key roles in arranging loans for the company.

Bank of America refused to enlighten the City or Wall Street yesterday about its potential losses, although Citigroup's chief financial officer, Todd Thomson, was more forthcoming.

Mr Thomson said that Citigroup's corporate and investment banking business was expected to suffer "negligible" credit losses and said its $70bn bond investments had a combined exposure of $325m.

Relying on investors such as Citigroup to to come clean about their ownership of bonds is particularly important. This is where most of WorldCom's debts lie and where transparency is particularly lacking, industry sources say, because many of the bonds issued by telecoms companies are in bearer form, which means that there is no requirement for institutions to register their ownership.

City sources said yesterday that hedge funds and other professional investors that specialise in trading so-called "distressed debt" were likely to be the owners of large numbers of WorldCom's instruments.

Yesterday, niche investors such as these were reported to be taking advantage of the cheap prices at which current owners of Worldcom's debt were desperately trying to offload their bonds.

Industry experts were also pointing out that many of the original owners of WorldCom's debt had already started to sell off their bonds before this week's startling revelations about the $4bn accounting hole. This is because Worldcom's financial problems had first become apparent some three months ago, giving the more conservative investors a chance to offload their positions.

For these reasons, Mark Thomas, banking analyst at investment bank Fox-Pitt, Kelton, acknowledged that the results of trawling through the publicly available lists of banks participating in loans and bonds could be "meaningless".

In the City, where anxiety about accident-prone Abbey National continues to linger, Royal Bank of Scotland indicated that the credit quality of its loans remained "strong". Its shares fell 6p to 1802p.

Barclays, which is a major player in the international debt markets, also managed to calm investor nerves. Its exposure is some £100m, it said.

The search for troublesome exposure for WorldCom debt stretched across the globe. Japan's fragile banking sector was also trying to build investor confidence by telling the local Jiji newsagency that its major banking groups, Mizuho and Bank of Tokyo-Mitsubishi were likely to have reduced their exposure to any debts.