biggest fall since 911, page-17

"Or should I say - can you do this?"

Those CDOs did not drop in value overnight. Their values have disappeared since S&P cut their credit ratings and they have become unmarketable. Whichever word you choose, hidden, shielded, parked, to describe the fact that the investment community is not aware of the extent of these losses. And they are not aware because these CDOS are off balance sheet. Westpac CDOs are on balance sheet and value at market.

"I would have thought that an independent auditor wouldn't allow this to happen."

I think they didn't and that is why the write-off. It is possible that the auditors forced NAB to write them off. You must appreciate auditors do not conduct continuous audit every day 24 hrs a day. Thus, the losses can be hidden between audits. If you can hold off for 12 mths you save a bit on capital costs to fund the provisions.

When investments are doing ok then the issue does not arise, there is no call on the mother ship for provision. However, in current financial climate where financial institutions are failing, the value at risk models need to allow for more visible public scrutiny. Fobbing them off to never-never land to reduce one's capital requirements for market risk is walking on thin ice. RBA needs to act and act now!