Two MPs have written to RBS demanding an explanation of its use of International Financial Reporting Standards (IFRS) to distort its financial position by up to £25bn. The inquiry, put forward by Steve Baker MP and former Tory front-bencher David Davis MP, has called on the bank to explain its accounting methods. The MPs have highlighted that while RBS's accounts stated £32bn in losses, the government's Asset Protection scheme accounts show an expected loss of £57bn from its toxic assets alone. The Daily Telegraph reports that the letter, written by technical expert Gordon Kerr, also details a disagreement between the MPs and RBS at a private meeting on 24 May. Kerr claims that the distortion in the accounts could be equivalent to as much as 50% of RBS's core tier one capital. This means that on a prudent basis, RBS has a basic capital ratio (leverage on total assets) of 2.75% rather than 5.5%, the letter states. While other banks can also expect further scrutiny, the MPs claim that the rules are at fault but also that RBS applied them more extensively than other European banks. RBS has claimed it is abiding by the standards, in line with other banks. Baker recently raised a private members bill calling for lenders to prepare dual accounts - old UK GAAP standards as well as IFRS - to force them to account for poor loans as well as failed ones. Earlier this year the House of Lords economic affairs committee published a report that was critical of IFRS, concluding that further investigation was needed into the audit market.
MPs grill RBS on £25bn accounting 'distortion'
by robertlovell in
Financial reporting on Thu, 02/06/2011 -
Friday, 3 June 2011
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