Search results
Results from the WOW.Com Content Network
Consequently, the asset write-downs may force the bank to sell such assets at fire sale prices and start a downward spiral. This causes a contagion problem and forces other banks to take similar write-downs. However, according to Laux and Leuz, this is not what typically happens in banks’ practices. [4] One of the causes:
Banking analyst Meridith Whitney argues that banks will not sell bad assets at fair market values because they are reluctant to take asset write downs. [7] Removing toxic assets would also reduce the volatility of banks' stock prices. Because stock is a call option on a firm's assets, this lost volatility will hurt the stock price of distressed ...
Write-downs on the value of loans, MBS and CDOs due to the subprime mortgage crisis. Company Business Type Loss (Billion USD) References UBS: bank $37.7 bln [1] [2] [3]
An asset depreciation at 15% per year over 20 years [1] In accountancy, depreciation refers to two aspects of the same concept: first, an actual reduction in the fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wears, and second, the allocation in accounting statements of the original cost of the assets to periods in which the assets are ...
Private-equity fund managers published their December 2008 valuations with substantial write-downs to reflect the falling value of the underlying companies. As a result, the discount to net asset value offered by buyers to sellers of such assets was reduced.
The distinction is that while a write-off is generally completely removed from the balance sheet, a write-down leaves the asset with a lower value. [4] As an example, one of the consequences of the 2007 subprime crisis for financial institutions was a revaluation under mark-to-market rules: "Washington Mutual will write down by $150 million the ...
Stranded assets are "assets that have suffered from unanticipated or premature write-downs, devaluations or conversion to liabilities". [1] Stranded assets can be caused by a variety of factors and are a phenomenon inherent in the 'creative destruction' of economic growth, transformation and innovation; as such they pose risks to individuals and firms and may have systemic implications. [2]
A toxic asset is a financial asset that has fallen in value significantly and for which there is no longer a functioning market. Such assets cannot be sold at a price satisfactory to the holder. [1] Because assets are offset against liabilities and frequently leveraged, this decline in price may be quite dangerous to the holder.