Two years after the global debt bubble began to burst, we are finally getting some honesty from our banks. Well, one bank, at least. The telephone number losses at Royal Bank of Scotland quickly take on a surreal quality, but their implications for the rest of the banking sector and indeed, the solvency of the British state, are very real indeed.
Fred Goodwin presided over an exceptionally reckless expansion at RBS - but not that exceptional. It beggars belief that other banks such as HBOS and Barclays will not be forced into similar asset write-downs and goodwill impairment charges. Facing a collapse in investor confidence, Barclays is desperately trying to reassure the market by putting out bullish statements about last year's profits, but these are next to irrelevant in the context of what it may be forced to admit this year.
As RBS points out in this morning's statement, even it managed to break even at an operating level last year. The question is to what extent banks are prepared to admit that the simultaneous collapse in asset values is not a temporary aberration but the permanent unwinding of their entire industry.
