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Friday, October 31, 2008

Write Down


A Write down in banking terminology means, deducting a portion of the banks assets from its net worth because they have become non collectible.

For e.g., when a bank grants a loan to a person A for Rs. 10 lacs and he declares bankruptcy after paying the first 3 EMI's then the remaining principal amount of the loan would become non collectible. Hence it would have to be written down from the banks assets.

Write Downs in the current US Financial Crisis:

With the ongoing economic crisis in the US, a lot of companies have had to write down a lot of illiquid MBS and Sub Prime Loans.

A MBS refers to Mortgage Backed Securities. To know more about MBS click here.

A Sub Prime loan is a loan granted to a non creditworth customer. The customer may not have enough income to even pay back the EMI. To know more about Sub prime loans click here.

Some Major write downs in the US:

1. Citigroup = $39 billion (Approximately INR 2 lac Crores)
2. Merryl Lynch = $29 billion (Approximately INR 1.5 lac Crores)
3. Morgan Stanley = $ 11.5 billion (Approximately INR 57000 Crores)

Some Major write downs in UK:

1. HSBC = $20 billion (Approximately INR 1 lac Crores)
2. Barclays Capital = $3.1 billion (Approximately INR 15000 Crores)

Write downs in India:

1. ICICI Bank = $0.264 billion (Approximately INR 1200 Crores)

$ - US Dollar
INR - Indian Rupee

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