BusinessCorporate FinanceBanks’ off balance sheet vehicles to be exposed

Banks' off balance sheet vehicles to be exposed

Senior bankers concede that serious thought needs to be given as to how and where vehicles were accounted for

Bankers have admitted that serious consideration needs to be given to bring
off balance sheet vehicles out of the shadows following massive sub-prime
writedowns.

At the Treasury committee’s investigation into Northern Rock last week, the
bankers made the admissions about the off balance sheet structures.

Gerald Corrigan of Goldman Sachs, William Mills of Citigroup, Deutsche Bank’s
Lord Aldington and Jeremy Palmer of UBS all conceded that serious thought needed
to be given as to how and where the vehicles were accounted for.

Treasury committee member John Thurso asked whether banks needed to take ‘a
long hard look at off balance sheet vehicles’ and provide more rigour to give
outside observers a proper view of a company’s worth.

‘Clearly, the answer is yes,’ said Mills, whose group chief executive Charles
Prince lost his job over the sub-prime losses. Palmer agreed: ‘I think it’s
already happening.’

Off balance sheet structures may have added to the uncertainty banks may have
faced in lending to each other, in hiding what issues different banks had.

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