Bank of NY chief says write-offs will help markets

By Joseph A. Giannone

NEW YORK (Reuters) - Bank of New York Mellon Corp (BK.N) Chief Executive Robert Kelly says banks worldwide face more painful asset write-offs, but that this process will help financial markets rebound and move past the credit crunch.

"I can't tell when it will end, but what I can tell you is that there is an awful lot of people around the planet, in various financial institutions, that need to write off a lot of paper," Kelly said at the Reuters Finance Summit in New York on Tuesday.

"We've got to get it behind us, as an industry, as a global industry, so that we get these things closer to market, so that they actually clear," he said.

The recently merged bank has avoided credit losses because over the years both predecessor companies -- The Bank of New York and Mellon Financial -- sold off or exited their commercial and consumer lending businesses.

Yet even for those banks that had deep exposure to hard-hit assets, the stock sell-off has gone overboard, he said, because the big U.S. banks generate enough profit and have enough capital in reserve to get through the crisis.

"I think financial institutions can afford to do that (handle the losses) through current earnings, largely," Kelly said.

He cautioned the crisis could evolve into a broader problem if it discourages lenders from reinvesting in the economy.

"The issue is how does it psychologically affect management of banks, do they pull their credit lines and act more conservatively?" he said. "Does it restrict credit lines to worthy individuals or companies? My hope is we don't see a tremendous amount of contagion into other sectors, into worthy borrowers, over time."

Kelly declined to speculate when a current impasse between companies seeking financing and the investors providing capital would end.

"I honestly don't know yet," he said. "It's always the same equation: fear versus greed, and fear is winning right now. But there will be an event, a tipping point where at some point people will say, 'Wow, these things are awesome investments.'"

That same reassessment may take place among investment bank stocks, which have been hammered on credit exposure concerns.

"At some point they're going to be a wonderful 'buy' and people are going to make an awful lot of money on those stocks," he said.