australian banks to loose 10 and 25 billion, page-14

When is a loss not a loss?

I love the creative accounting Banks are renowned for - i.e. "provisional write-downs" in the billions on the asset side of the ledger yet profit generated "in the billions" on the profit and loss accounts.

I remember over a long lunch my bank manager was explaining to me that when I deposit a $100,000 into a bank the bank's assets go up by a $100,000 - when they lend it out to a third party the banks assets go up by another $100,000.

I tried to argue with him that in this example the bank's assets are zero (due to the corresponding liabilities) his reply was "if we used that accounting principle all banks would be insolvent?"