Last Thursday, S&P cut the ratings of 51 CDO instruments (including one that has yet to list anywhere) and 19 Credit Default Swaps, another form of debt transaction as the chairman of the US Federal Reserve, Ben Bernanke (right), predicted that the total loss from defaults on American subprime mortgages could reach $100bn ( 72 bn).

Of the listed CDO instruments, 58% had their European listing on the Irish Stock Exchange (ISE) with one vehicle receiving prospectus approval from the stock exchange as recently as last Monday.

Meanwhile, S&P had warned that it may downgrade bonds issued by another 19 CDO vehicles, 11 of which are listed in Dublin. S&P said that the warning reflected the "increased probability of default within the overall portfolios" created by the US sub-prime crisis.

The ISE declined to comment on what potential effect the downgrades could have on the exchange's reputation, despite remarks made last month by the exchange's head of debt securities, Gerard Scully that the exchange "has a pivotal role in selling Ireland Inc".

A spokesman for the Department of Finance said, however, that it did not anticipate Ireland's image as a financial services centre would be affected by its close association with debt transactions in recent years.

"Suggestions of any reputational damage for Ireland are entirely misplaced and appear to be based on a misinterpretation of the role of the listings system or its place in a much broader financial regulatory system, " he said.

"Recent downgrading in credit ratings of debt instruments are being attributed in media reports to the US housing market and bad lending practices in the US which are not regulatory matters for Ireland."

Meanwhile, Matt King, the head of quantitative credit strategy at Citigroup in London, said it was curious that so many of the downgraded bonds were listed in Dublin but that it was unlikely to damage the market's reputation.

"They would possibly have to look at it but it's not like it's destabilising to Dublin. I believe that if more hedge funds collapse, people won't blame Dublin or their location but the rating agencies, " he said.

The increasing levels of sub-prime defaults in the US have already hit some US-based hedge funds with US bank Bear Stearns revealing last week that one of its funds, which invested heavily in property debt, is virtually worthless whereas another has lost 91% of its value. Aggrieved investors in the two funds are understood to be considering legal action against the institution.