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Fool.co.uk slams banks' write offs

Banks should not let their bad loans losses affect customers, personal finance website Fool.co.uk warned yesterday.

The comments follows HSBC's announcement yesterday of £8.7 billion-worth of loan write offs - mainly stemming from last summer's collapse of the US sub-prime mortgage market - as part of its end of year results.

Many financial institutions were found to be heavily exposed to the sub-prime debts - which had previously been traded between banks on the money markets worldwide.

Following the sector's collapse, this has led to announcements of enormous write-offs across the board as banks declare their results.

Other than HSBC, RBS has admitted to £2.1 billion of bad loans, Barclays to £2.8 billion and HBOS to £2.1 billion.

David Kuo, head of personal finance at Fool.co.uk, commented: "The eye-watering write-offs by British banks suggest that they have taken on unacceptable risk. This is not only detrimental to shareholders, who generally accept the relationship between risk and reward, but also harmful to customers, who may not.

"There is now a danger that banks will allow the pendulum of risk to swing from excessive risk-taking to extreme risk-aversion. But what goes around comes around, and penalising prudent customers in the short term will damage goodwill in the long term."

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