Gains in the prices of some formerly toxic assets may prompt banks to book some profit on positions they have already written down, but boards and auditors are likely to advise them to be cautious. Some executives point out the market for toxic assets is thin, the Financial Times reported. Price increases could be

short-lived and a new reversal would force banks to take another write-down. The Markit ABX Index, which tracks securities backed by subprime mortgages and other home loans, has risen more than 30 per cent over the past three months, the FT reported, as investors were willing to take on more risk and the U.S. government poured liquidity into the markets. Because bank balance sheets are complex and the institutions have applied accounting rules differently, it is difficult to know how much potential profit would be recorded, but it could lead to billions of dollars worth of accounting gains. Banks wrote down more than $1 trillion on the toxic assets, in addition to sustaining $600 billion of actual losses on loans gone bad. Accounting gains now would bolster bankers’ arguments that the industry is recovering its health, the newspaper said.