View more on these topics

IMA tells MPs toxic asset fears prevent its members investing in bank reconstruction

The Investment Management Association told MPs that some of its members are not prepared to invest in bank reconstructions because they feel institutions have yet to disclose exposure to toxic assets.

Speaking at a Treasury select committee hearing on accounting standards and the banking crisis IMA director Liz Murrall said that she had written to members of the IMA board to ask whether they were going to invest in
UK bank reconstructions.

She read out one of the responses she received from a board member.

It said: “In our view investors are sceptical about investing in banks because they don’t believe the full impact of structured credit losses has been taken in the accounting. We feel it is necessary for the banks to fully write down the toxic assets before any investor confidence can be brought.”

The IMA says that fair value accounting would help to recognise losses fully and should be part of the solution to the current crisis and restoring investor confidence.

But British Bankers’ Association executive director of financial policy and operations Paul Chisnall, who also gave evidence to MPs this morning, does not believe that fair value accounting should be extended as it would force banks to make huge writedowns based on credit spreads in the current dislocated markets.

He said: “My views are that the current mixed measurement model is appropriate. What I don’t support is a move to extend fair value accounting to into the long-term banking book, because I think that if you were to take that step you will see very, very significant losses write across Europe and America and you would see tens of billions of dollars of writedowns simply because the current market credit spread is so high in relation to historic standards.

“I think that would be a very dangerous step for us to take.”

Recommended

The simple truth

The market troubles have brought a lot of things firmly into focus and the safety of people’s investments is now going to be seen as more important than the rate of the return they get.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com