Senior executives from four of the world’s biggest investment banks blamed investors yesterday for not reading the warnings attached to complex investments that have plunged in value after the credit crunch.

Citigroup, Goldman Sachs, UBS and Deutsche Bank told MPs that they had given “highly sophisticated investors” sufficient information on the risks posed by collateralised debt obligations (CDOs) and other credit-based investments – but in some cases investors had failed to “do their homework”, they said.

Executives from the four banks were questioned by the Treasury Select Committee as part of its investigation into the global liquidity freeze.

Asked about whether the banks had withheld vital details about CDOs, Jerry Corrigan, a managing director at Goldman Sachs and co-chairman of the bank’s global risk management committee, said: “For a sophisticated investor, the disclosures relating to CDOs was pretty good. Could it have been better? Yes.

“But this question of opacity has to be treated with caution. For highly sophisticated investors, there was information that would have enabled them to ask the appropriate questions. Unfortunately, I suspect that the amount of diligence that went into looking at and studying these disclosurers wasn’t always all that it should have been.”

Lord Aldington, the UK chairman of Deutsche’s investment bank, said that in “certain isolated cases it’s not clear that the investors fully understood what they were buying or that they took advantage of the opportunity to do their homework”.

Mr Corrigan attributed the growth in the market for such complex products to the appetite among investors for high-yield investments. “The reach for yield on the part of institutional investors goes a long way to explaining the rapid expansion of structured credit products,” he said.

Citigroup and UBS told the MPs that their losses on sub-prime mortgage-related products exceeded the profits that they had made from the high-risk loans.

Bill Mills, chief executive of Citigroup’s Europe, Middle East and Asia (Emea) investment banking business, told the MPs that “[Citi-group’s] losses greatly exceed the profits we’ve made on [sub-prime] business over several years”.

Jeremy Palmer, UBS’s Emea investment banking chief executive, said that he was unsure whether his own bank had made a profit on sub-prime but that he was inclined to think that it had not.

Mr Corrigan said: “On balance, [Goldman Sachs] probably made money.” Lord Aldington said that he was unsure whether the bank had calculated whether it had made a profit. “My guess is that we’d have been more in the Goldman Sachs camp but that is a guess,” he said. Mr Corrigan attributed his bank's success to clever hedging.

“In our second quarter in May we did sense that the deterioration, particularly in the sub-prime space, was worsening and we did begin to hedge our exposure in ways that turned out reasonably well from a financial point of view,” he said.

Asked to estimate on a scale of one to ten how reliable the writedowns already taken by their banks were, executives from UBS and Deutsche Bank refused to comment. Mr Mills said that Citigroup’s estimates were an “eight or nine” on the scale of accuracy and Mr Corrigan put the Goldman Sachs figures at 9.75.

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