Some of the world's biggest banks, which are owed money by International Securities Trading Corporation (ISTC), have been asked whether they have sold the collateral held against loans provided to the now insolvent Dublin finance company, writes Simon Carswell, Finance Correspondent

The specialist lender to financial institutions, which was established by former Anglo Irish Bank executive Tiarnan O'Mahoney, is under court protection. The company's examiner, Dublin accountant John McStay, is believed to be assessing whether the firm's bank lenders have sold the collateral. Mr McStay, who has been in contact with ISTC's bank creditors since his appointment as examiner was confirmed 10 days ago, is trying to assess the full scale of the company's losses before approaching potential investors for more capital to fund the rescue of the company.

If one of the firm's bank creditors makes a loss on the sale of any collateral held against loans provided to ISTC, then the loss is transferred to the firm, becoming a debt on ISTC's books.

The company is the largest Irish casualty of the credit crunch. It was forced to seek court protection late last month and to apply for the appointment of an examiner to protect it from its bankers after the company revealed it was facing a shortfall of €871 million if it was put into liquidation.

It was reported last month that Deutsche Bank and UBS had started selling their collateral following the downgrading in value of some of the firm's investments.

The Dublin company was forced to postpone its results, suspend trading of its shares in an unofficial market and scrap a €150 million fundraising after writing down its investments by at least €70 million following the downgrading of its assets.

ISTC told the High Court last month that fewer than 40 per cent of the company's assets, held by creditors as collateral, have been offered for sale or sold by them and that the remaining 60 per cent remained unsold.

It said it believed that many of its creditors had not sold assets because the illiquidity in the markets had not allowed the creditors to sell the assets without incurring large losses.

A number of parties have expressed an interest in investing in ISTC in the belief that, despite the liquidity freeze, its business model may be sound. Goldman Sachs and hedge funds Silverpoint and Avenue Capital have been considering a possible investment. Five other parties, including two banks and two asset-management companies, are also interested in investing.

ISTC's creditors are "a veritable who's who of the banking world on an international scale", Mr Justice Peter Kelly said last month. They include ABN Amro, Bank of America, Credit Suisse, Merrill Lynch, Morgan Stanley and Royal Bank of Scotland.