4/7/2008: Bank of Scotland chief warns fair value could lead to recession

Excerpt from Bank of Scotland chief warns fair value could lead to recession
By Katherine Griffiths

Former Bank of Scotland CE Sir Peter Burt has called on the Bank of England to relax rules on how banks account for their assets on the balance sheet, in the face of mark-to-market or fair value accounting rules which could see these booked below their value, amidst a volatile market.

Sir Peter is the latest senior figure to add his voice to the growing revolt against mark-to-market pricing, warning over the weekend that the credit market freeze is so serious that Britain could slump into recession, the Sunday Telegraph reported.

'To the proverbial visitor from Mars, the problem and its solution might seem clear. In the past week, I have been told by senior bankers and customers of having mark[ed] down assets of undoubted value. No bank will lend or invest if, by doing so, they have to take an immediate write down as a result of being required to mark the asset to an unrealistic market price,' Sir Peter said.