Even if it has written off all goodwill associated with the 2003 acquisition, HSBC is still far from being able to draw a line under Household. HSBC makes much of its “signature financial strength”. Indeed, it could absorb $30bn of losses and still retain a tier one capital ratio of 7.5 per cent. But that measure now carries little credibility. If it did, investors would have piled in to buy “well-capitalised” banks such as Citigroup. Investors are putting more focus on tangible common equity as an indicator of a bank's ability to survive without further capital and by this measure, HSBC is hardly the fortress of its own myth-making. Knight Vinke, the activist investor, estimates this ratio, now 2.8 per cent, could fall to below one per cent if these fair value adjustments materialise.

There is room for caution. If US house prices, already down 25 per cent, suffer a peak-to-trough fall of 40 per cent and if US unemployment enters double digits, the fair value adjustments on Household would be substantial. HSBC has today reiterated its intention to stand behind bondholders in Household, even though its debts are non-recourse to the group. It believes the damage to its reputation and standing makes this a decision that takes itself. Others disagree, which helped push down HSBC shares by 18 per cent on Monday. Whatever the right and wrongs, standing behind the Household bondholders exposes HSBC shareholders to substantial ongoing losses and further cash calls of an unknowable size.