NAB's decision to book an $830 million charge against $1.2 billion of US home loan exposure to carry write-downs to 90% of the original value sends an extremely gloomy message to the global banking system and the world's sharemarkets.

NAB chief executive John Stewart says it is a worst-case view. Investors everywhere will have to hang on and hope it is not confirmed.

NAB's write-down relates to indirect "conduit" exposure to US mortgages, and reflects NAB's view about how the US housing market slump will unfold over two or three years, as defaults continue to rise, the queue of unsold houses continues to lengthen, and forced sales generate nowhere near enough to cover the mortgage. In some cases, sales were recouping as little as 50% of the outstanding mortgage, Stewart said yesterday.

The write-down reflects two ultra-conservative calls. First, the bank is valuing its US mortgage exposure on a worst-case view of how that process of defaults and forced house sales occurs. Second, it has decided, after some internal discussion, to front-load the expected losses, instead of trickling them out.

There is no way NAB's 90% write-down will be mirrored by every bank with US mortgage exposure. Measured by the mortgage debt, the US housing market is worth about $US5000 billion ($A5212 billion). It simply is not going to fall to 10%, or $US50 billion.