Standard Chartered has been forced to drop plans to provide liquidity to its Whistlejacket structured investment vehicle (SIV), after a plunge in the value of its assets meant that a receiver would be appointed to the SIV.

The bank announced last week that it would transfer $7 billion (£3.6 billion) of Whistlejacket's assets to its own balance sheet to avoid a fire sale of the SIV's investments in asset-backed securities, corporate bonds and collateralised debt obligations.

Standard Chartered planned to buy the debt issued by Whistlejacket if there was insufficient appetite in the market.

The cash would have been used to pay out exiting investors. But a condition of the bailout was that Whistlejacket must not have an "enforcement event".

Standard Chartered revealed today that the value of Whistlejacket's assets had fallen sufficiently to trigger the appointment of a receiver, which is considered to be an enforcement event.

As a result, the bank must drop its rescue plans.

SIVs are off-balance-sheet vehicles that issue short-term and medium-term debt to buy longer-term assets.

SIVs hit trouble during the credit crunch last year when their underlying investments fell in value and the investors who traditionally bought their short-term debt left the market.

Some banks have bailed out their SIVs to avoid being forced to sell the vehicles' assets at the bottom of the market.

Richard Meddings, the finance director of Standard Chartered, said today: "We continue to have confidence in the quality of Whistlejacket's assets.

"We remain willing to have discussions with the receiver, once appointed, and hope to find a viable solution to ensure flexibility for Whistlejacket."

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