"They should have put some money into a sinking fund"(They do, it is called "Allowance for loan and lease losses".)
The issue is that ships, like buildings are valued in several ways. One way is the cash flow generated (potentially) by the vessel. Since the Baltic Dry Index has dropped so quickly, the cash flow generation capability of ships has dropped and therefore their value too.
Generally a loan loss reserve is about 1-2% of a portfolio. If you are lending 75% of the cost orappraised value of the ship and it isn't earning, but is laid up, well do the math.
It was like a joke. You know “sinking” fund and “ships”. But yes you are right, nobody would be setting aside 25% or more for possible loan losses. If there was that degree of risk, the loan would not have gotten made.
parsy, who will refrain from plays on words for a while