Mr. Matthew Elderfield:

I am not an accounting expert but I will give it my best shot. One examines a loan that is in place, even if it is in arrears. There are two things one can recognise. The first is the stream of revenue coming from payments and interest, maybe not full interest payments but some payments over time. The second is that at the end of the day there is the collateral value to be realised. We are saying that if the solution a bank is offering to the customer is not on sustainable terms then we will not let the bank count the first stream of income. We will insist that the bank assumes that it will only get the value of the disposal when it comes to repossession, in order to be suitably prudent and conservative. To do so, one must make some assessment about where house prices will be and factor in disposal costs, which can be quite significant.