PM calls for candidness from banks

Prime minister Gordon Brown has urged banks to declare their losses on troubled assets as soon as possible.

In an interview with the Financial Times, Mr Brown said the writedowns were needed to help boost confidence in the economy.

He told the paper: “One of the necessary elements for the next stage is for people to have a clear understanding that bad assets have been written off.

“We have got to be clear that where we have got clearly bad assets, I expect them to be dealt with.”

Mr Brown also warned of the danger of “financial isolationism” as banks restricted their lending activities to their domestic markets.

The move comes amid reports that the government hopes to set up a ‘bad bank’ in which it seeks to place all toxic assets in order to help banks repair their balance sheets and encourage them to increase lending to businesses.

Last week, the government announced £20 billion in guarantees to loans given to small and medium enterprises in order to prevent companies from going into administration due to a lack of finance.