UK Banks Sitting on £40bn Losses, No Provisions Even When Covenants Breached

5 June 2012

According to PIRC the shareholder advisory group, the UK banking sector is sitting on £40billion of  losses that have not been provided for. We call this "extending and pretending" with the debts of failing companies simply being rolled up and hoping for a better day.

The UK has thousands of companies breaching bank covenants (which are borrowing rules agreed with their lenders) but these are not being closed down or broken up. Instead the banks ignore covenants, there is little hope of getting the loans back in the current stagnant market, hoping that asset values will somehow improve in the future. Then when there is a future market to mark values to, the banks will place companies into pre pack administration in the hope that this process, which is hugely costly, leads to recovery of more than the current expected losses.

If your company, your client or your investee is breaching covenants act before the banks, get specialist restructuring advice from KSA Group.