Wall Street at risk for $30B in bond insurer crisis

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NEW YORK (CNNMoney.com) -- If the bond insurance crisis worsens, banks and securities firms may have to sock away billions of dollars more in reserves, Moody's Investor Services said in a report published Tuesday.

Right now, the credit rating agency estimates that about 20 different financial institutions have about about $120 billion worth of credit default swaps on asset-backed collateralized debt obligations guaranteed with different bond insurers.

The report said that banks may have to ante up as much as $30 billion in reserves to offset worsening conditions related to the bond insurance industry.

To date, major financial firms have endured losses totaling more than $100 billion as a result of bad bets on mortgage securities and some analysts are warning that that number could grow.

Some fear that if bond insurers like Ambac (ABK) and MBIA (MBI) were stripped of their 'AAA' rating, that could spark the next wave of writedowns at the nation's largest financial firms.

Credit rating agencies Moody's and Standard & Poor's have threatened to downgrade the firms on fears they do not have the ability to pay claims on mortgage-backed securities that soured as a result of the credit crisis.

Moody's declined to reveal which financial institutions relied heavily on bond insurers to guarantee their collateralized debt obligations.

The company also said it was still studying what impact, if any, its findings would have on the ratings of the banks or securities firms.