Of course, it takes one to know one. The no-doubt accurate call on the health of British banks comes from one of their own, Royal Bank of Scotland. Funny how no US bank is willing to make the same call.
From the Independent:
Britains biggest banks are “technically insolvent”, Royal Bank of Scotland said yesterday…
Analysts working for RBS, one of several British banks to have received emergency funding from the UK Government last year, told the City that “the domestic UK banks are technically insolvent on a fully marked-to-market basis”.
The warning does not mean British banks are about to go bust, because the assessment is purely theoretical, and RBS said the position was “not unusual at this stage in the economic cycle”.
However, it will add to pressure on the Government to provide more support for the country’s banks…
The value of Barclays fell by a quarter in stock market trading yesterday, amid a series of wild rumours about its finances, although the bank said it saw no need to comment on the drop.
City analysts said the bank had been targeted by traders after regulators lifted a ban yesterday on the short selling of financial stocks. Barclays’ share price, along with the value of other British banks, was also hit by dismal news from the international markets…
Treasury officials were still discussing plans to help British banks last night but the proposals are likely to include up to £100bn of new guarantees for the wholesale markets that underpin mortgage and other loans.
Other possible measures being considered include state support to help Britain’s largest companies raise their own funds. Another option is to launch a “bad bank” to remove tainted assets from the banks’ balance sheets, though while this policy is under consideration, it is thought to remain some way off.
Other proposals include ring-fencing the toxic assets within bank balance sheets. Lord Mandelson, the Business Secretary, has also talked of easing the terms of the Government’s £37bn bank bailout in order to kickstart lending. Downing Street made it clear yesterday that the Government remained committed to doing “whatever is necessary to help British businesses and families get through this global financial recession”.