oh dear: IMF warns on UK banks masking bad debts

[AtW]

Lender forbearance, where loans are extended or payments reduced, “may, in some cases, have masked the extent of risks, given the high indebtedness of the household and commercial real estate sectors,” said the Fund. (AtW's: can someone come up with a realistic reason why would banks forsake profits in such cases other than attempt to avoid classifying those debts as lower quality? Meanwhile when they do it someone there must be getting MASSIVE bonus for "high quality" of loan book!)

Just last week it emerged that the Financial Services Authority has accused banks of moving mortgage customers on to less strenuous terms to conceal bad debts.

The latest warning came as the IMF delivered a strong endorsement of the Government’s austerity plans on Monday, but laid out a clear Plan B of monetary easing and tax cuts in case of an emergency.

The “unexpected” weakness in growth and rise in inflation raises the question of whether it is time to adjust economic policies, said the global lender, as it performed its annual health-check on the UK economy.

However, despite cutting its growth forecast and raising its inflation expectations to reflect recent disappointments in the data, the Fund concluded:



Source: IMF warns on UK banks masking bad debts - Telegraph

[Gonzo]

(AtW's: can someone come up with a realistic reason why would banks forsake profits in such cases other than attempt to avoid classifying those debts as lower quality? )

No Alexei, that is exactly why they are doing it.

With interest rates so low, it does not cost them so much to do it and it is better for them than booking real losses against their profits and flooding an already difficult market with repossessed houses like they did in 1992.

If the economy and job numbers improve before the Bank of England has to raise interest rates then everything might just turn out OK.