An investor might be tempted to think these days that many of the largest banks in the world have suddenly and inexplicably swung into loss after years of reporting record profits. Chief executives have been sacked, hedge funds liquidated and once actively traded markets for low-risk assets are now virtually shut.

A large portion of the crisis of confidence now affecting global markets comes from non-cash losses reported as a result of the adoption of "fair value" accounting rules in the US. Fair value accounting was adopted in the US after years of debate and, in theory, provides more transparency than measurements based on historical cost.