Are Banks Insured Against Bad Debts?

[Wishes]

This might be a silly question but I was wondering are banks insured against debts that may have to be written off, especially mortgage debt?

 

[jpd]

No, they have to write the loss off in their Profit & Loss accounts - this reduces their accounting capital.

There are limits to the amount of capital they must hold in order to continue to trade - the State has already provided a lot of extra capital in the last few years to enable them to acknowledge an expected level of losses. If the losses exceed the level expected, then either the bank will need more capital from the taxpayer or it will be shut down

 

[Bronte]

Yes, because despite being a private business they will when they fail be bailed out by the taxpayer.