Losses incurred by the world’s major financial institutions on toxic assets hoovered up in the final boom years have hit $2,800bn (£1,800bn), according to the Bank of England.
The Bank’s estimates on the size of writedowns facing banks, insurers and hedge funds – published today in its Financial Stability Report – have more than doubled since its last update in April, and raise the spectre of massive new provisioning by Britain’s troubled lenders. Royal Bank of Scotland, for one, is expected to reveal another £4bn of writedowns on Friday.
In the UK, the Bank calculates, “mark-to-market losses” have hit £123bn compared with the £63bn estimated in April. To date, Britain’s lenders have collectively written down less than £20bn, though the Bank conceded that the market may be overstating the losses by reflecting “substantial discounts for uncertainty”.
Losses in the US have jumped from $739bn to $1,577bn, the Bank says, and from €344bn (£276bn) to €785bn in Europe.