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A write down occurs when a bank or investment firm reduces the value of an asset it holds in order to bring the assigned value in line with current market value.
Some write downs are customary, following a practice known as marking to the market. In this case, the fluctuating values of marketable securities in trading accounts are adjusted daily, writing them up if they have increased in value or writing them down if they have lost value.
Write downs may also be required to acknowledge that the prices at which securities are recorded on a firm's books exceed the amount they could be sold for, assuming they could be sold at all. The difference between book value and market value is recorded as a loss. Extensive write downs of a firm's assets can threaten the viability of the firm itself.
For example, in the wake of the subprime meltdown and the resulting tightening of credit starting in 2007, some investment banks were forced to write down billions of dollars of once highly rated collateralized debt obligations and other complex loan products that were structured with mortgages that defaulted.