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Tag Archives: Accounting

How banks unjustly inflate profits, boost capital and pay unearned bonuses

Yesterday in Parliament, I chaired an event with Gordon Kerr, launching his report The Law of Opposites, which is covered in the Guardian today: Banks use accounting loopholes to inflate their profits and bolster staff bonuses, according to a report published on Wednesday that calls for changes to the international accounting rules. According to the paper by the Adam Smith Institute, banks are able to use complex financial products such as credit default swaps to report profits that they might […]

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We won’t achieve financial stability under IFRS

I spoke by Skype link to the Local Authority Pension Fund Forum this afternoon on a panel about the International Financial Reporting Standard and its faults. The LAPFF has just published a report which critiques the Standard as a key contributor to the financial crisis. I first met IFRS in a technical capacity when working as a software consultant. It struck me then as suffering from being the product of a committee without years of evolution behind it. It seems […]

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Pressing the Chancellor on accounting standards for banks

As The Telegraph in particular has reported, there are serious concerns about the IFRS accounting standard applicable to banks. It may enable and encourage banks to report false profits and fake capital. If my specialist colleagues are right, the banks could be in much worse shape than commonly thought. Via Hansard in the statement on the ICB report: Steve Baker (Wycombe) (Con): I congratulate the Chancellor on this report , but I believe it takes for granted the adequacy of accounting […]

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Bank warns lenders over bad loans – FT.com

As I have been saying about IFRS: The FPC said it was most concerned that banks had not set aside adequate provisions for this potential new crop of troubled loans. “If provisioning is inadequate, banks’ reported profits and levels of capital may provide a misleading picture of their financial health,” said Sir Mervyn King, Bank governor and chairman of the FPC. via Bank warns lenders over bad loans – FT.com. In the lastest Financial Stability Report, the Bank of England […]

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ConservativeHome’s Platform: Steve Baker MP: Accounting has never been so exciting!

Via ConservativeHome’s Platform: Steve Baker MP: Accounting has never been so exciting: There is a growing awareness that one of the main contributors – if not the main contributor – to the severity of the financial crisis was the system of accounting rules under which UK banks continue to operate. In particular, the culprit is the system of International Financial Reporting Standards (IFRS), an EU-sponsored regime which has applied to UK and Irish banks since 2005. It’s something Howard Flight […]

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Royal Bank of Scotland told by MPs to explain £25bn accounting ‘distortion’ – Telegraph

The Telegraph picks up my Bill on bank accounting: David Davis, the former Tory front bencher, and Steve Baker, the MP for Wycombe, have called for RBS to prove that its accounts are not being distorted by the controversial International Financial Reporting Standards (IFRS). The letter, seen by The Daily Telegraph, details a disagreement between the MPs and RBS at a private meeting on May 24. The MPs argued that IFRS, which has been described as a “fatally flawed” system, […]

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A Bill to expose banks’ false profits, overstated capital and hidden losses

My Financial Services (Regulation of Derivatives) Bill has now been printed, ready for second reading on 10 June. You can obtain the PDF here and track the Bill’s progress here. The press release, including links to background evidence and press coverage, is here. When I introduced my Bill on 15 March, I explained how the accounting rules for banks incentivize trading in derivatives by enabling unrealized profits to be booked up-front, leading to large but unjustified bonuses and dividends. On 30th March, […]

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ConservativeHome’s Platform: Steve Baker MP: It’s time to bring casino banking into the light

Last year, I learned how derivatives can be used by banks to manufacture the illusion of profit. Tomorrow, I am introducing a ten-minute rule bill which would bring this casino banking into the light. Read more via ConservativeHome’s Platform: Steve Baker MP: It’s time to bring casino banking into the light.

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