Accounting seems so dreary but what if broken rules allow banks to show false profits, overstate capital and hide losses? What if the banks have paid bonuses out of unrealised gains? The Bill I introduced in March 2011 deals with just those problems. All the details are here. I learnt […]
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Bank’s risk management affected by IFRS accounting
Since I introduced a measure criticising IFRS accounting and requiring banks to prepare accounts to UK standards, there have been a stream of developments backing up my criticisms. The problem extends as far as Korea. Via bruegel.org: Korean firms’ business activities, such as risk management and foreign investment, have been […]
Read MoreTwo simple steps to transform the culture of banking and to forestall the next outrage
It’s time to privatise commercial risk in banking and insist on prudent accounts. Government should: Eliminate moral hazard from the financial system by implementing this measure to make bank directors strictly liable without limit and to treat as capital both directors’ personal bonds and, for five years, the bonus pool. Introduce […]
Read MoreBanks: gaming the rules to generate illusory profits
As I prepared an article on how banks generate illusory profits and artificial levels of capital by gaming the rules, I rediscovered this limerick in Gordon Kerr’s related paper, The Law of Opposites: There was a young man from Darjeeling Who got on a bus marked “To Ealing” The sign […]
Read MoreGovernment faces fresh questions over accounting rules | The Guardian
Further to my work on accounting: The government is facing fresh questions about whether current accounting rules are suitable for banks, amid claims that they permit the overstatement of profits and fail to provide a proper picture of losses. The issue is being raised by Lord MacGregor, chairman of the […]
Read MoreIFRS accounting appears to allow Barclays to double stated profit
It has been brought to my attention by PIRC that Barclays are leaving £2 billion of bonuses out of their accounts within IFRS rules. Taken together with another flaw in IFRS, it appears that Barclay’s true profit is about half that allowed under the rules. Via the PIRC site: Barclays is still […]
Read MoreThree flaws in the Financial Services Bill
Under the heading, Osborne looks to limit damage of ‘credit busts’, the FT gives a neat summary of the Chancellor’s plans. In particular: He said the FPC would also look out for dangerous linkages in the financial system and identify exotic new instruments that might undermine stability. It would be […]
Read MoreLord Lawson condems the present accounting regime for banks
In the Irish Times: ON JANUARY 1st 2005 the European Union imposed accounting rules on Irish banks containing a significant but simple flaw that had an impact on the fatal decision by the Irish government in 2008 to give Irish banks a blanket guarantee. via Bad loans were legally hidden […]
Read MoreBank of England’s Haldane endorses concerns on bogus bank accounting
The Bank of England’s Executive Director Financial Stability, Andy Haldane, has set out the case for banks to be held to different accounting standards because the existing rules have may allowed banks to overstate their profits and exacerbate their losses. This is something I covered in a private members’ bill […]
Read MorePressing the Chancellor on bank accounting
Via Hansard: Steve Baker (Wycombe) (Con): Chapter 3 of the Government’s report, on loss absorbency, seems, perhaps reasonably, to take for granted the adequacy of accounting standards. I press the Chancellor in his forthcoming White Paper to consider seriously the pernicious effects of the international financial reporting standards, which were applied […]
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