Worsening balance sheets have escaped attention

..........Worse, if the impairment to balance sheets is bad enough, taxpayer money will have to be used to bolster their capital. Remember, investment portfolios — and, hence, profits have already taken a beating thanks to the sharp increase in bond yields. So what can Rajan do? Regulatory forbearance, allowing banks to pretend aal izz well when it is anything but, is the standard refuge of supervisory authorities. It has been tried and tested in the past, and more recently with restructured assets that have been euphemistically named restructured “standard” assets. This simple expedient allows banks to get away with much lower provision for bad debts than warranted.............

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