The Bankwatch

Tracking the consumer evolution of financial services

Time to accept reality, and value bank assets at their real value

This is yet another staggerring development that leaves only one simple and obvious conclusion.

Bank assets must be valued to market value immediately.  The argument that the market cannot withstand the result which would of crouse imply enormous writedowns, probably beyond that which will be the ultimate result, but the argument to wait is no longer valid.  Banks have already been written down close to zero on the stock market in any event.

Banks value their loan write downs based on historic data.  These times are an exception.  Time to predict based on locations, and job types – the result will be a catastrophic write down, but when proven wrong those write offs can always be pulled back into income later.  Better that conservative approach than the current death by a thousand cuts that will never permit return of confidence to the banking sector.

In all seriousness, clearly there is a need to manage the communication of the result carefully, and this can only be accomplished with some form of Government assistance and guarantees in order to maintain orderliness in the markets while the asset revaluation is accomplished.

Then and only then, will there be a way forward working from an established and known base.

Lloyds hit by £10bn HBOS losses |

Investor confidence in Lloyds Banking Group was shaken further Friday after it warned that the newly acquired HBOS had suffered a worse-than-expected £10bn loss in 2008, triggering a share price collapse for the combined bank.

Written by Colin Henderson

February 13, 2009 at 19:59

Posted in Uncategorized

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  1. […] Baker suggests quick and decisive action, and I agree. […]

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