Banks hit back at PIRC’s £40bn undeclared losses claim

<p>PIRC has taken issue with international accounting standards that prevent banks from reflecting “expected losses” in their profits. The UK’s top five banks had an estimated £27bn of “expected losses” last year, PIRC said, and overstated profits by a further £13bn due to the accounting treatment of deferred bonuses and the value of their own debt. The rules, it said, were “masking the true position by including fictional assets and fictional profits” – allowing banks to award larger bonuses and dividends. The banks disputed the claim, saying that PIRC had over-extended its analysis. They stressed they already declare some “expected losses” under regulatory rules and that those are typically a multiple of eventual write-offs. Standard Chartered said PIRC’s estimate that it had $3.6bn (£2.3bn) of undeclared losses was “fundamentally incorrect”. In its 2010 accounts, it pointed out, the “expected loss” for the following year was $3.19bn, but its write-off in 2011 was just $584m. It added that it was “obliged to report in this way” under the accounting standards and that it “vigorously disputed [PIRC’s] rationale”. Barclays added that PIRC had been "purposely misleading". "Suggesting that those accounting standards have in some way reduced our appetite to lend to creditworthy businesses or individuals is unjustifiable," it said.  PIRC described its £40bn estimate as “conservative” and said its calculations were supported by the losses the Treasury expects at Royal Bank of Scotland, as disclosed in the state-backed Asset Protection Scheme. Including deferred bonuses, fair value of its own debt, de-risking costs and expected losses, PIRC said RBS’s total undeclared losses came to £18bn. PIRC has been campaigning for a change to the accounting rules for banks. Senior regulators have also expressed concerns with the standards and the House of Lords has described them as deeply flawed. The banks said their accounts are transparent and that they “look through” volatile items such as gains made on their own debt.</p>

Banks hit back at PIRC’s £40bn undeclared losses claim

PIRC has taken issue with international accounting standards that prevent banks from reflecting “expected losses” in their profits. The UK’s...

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