US investment bank Merrill Lynch is to write down $5.7 billion (£2.86 billion).
In a bid to plug the hole in its finances, the US investment bank is launching an $8.5 billion public offering of shares, with Singapore sovereign wealth fund Temasek Holdings purchasing $3.4 billion.
The loss of $5.7 billion set for the third quarter will come as Merrill Lynch aims to reduce its risk exposure.
The write-down consists of losses of $4.4 billion from the $6.7 billion sale of contracts for difference (CFDs) to Lone Star Funds, which were worth £11.1 billion at the end of the second quarter.
John Thain, chairman and chief executive of Merrill Lynch, said: "The sale of the substantial majority of our CDO positions represents a significant milestone in our risk reduction efforts.
"Our consistent focus has been to opportunistically reduce risk, and in order to take advantage of this sizeable sale on an accelerated basis, we have decided to further enhance our capital position by issuing common stock."
Two weeks ago Merrill Lynch reported a $4.9 billion second quarter loss, with some $9 billion of write-downs.
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