Another effect of Gordon Brown

All rather recondite and accountingly geektastic. But still Our Gordo to blame:

PIRC has calculated the amount of bad debts the banks may have to write off in coming years but have yet to subtract from profits, together with other items such as deferred bonuses not booked.

HSBC, which is the biggest bank by assets, was shown to have £10.4bn of hidden losses, the Royal Bank of Scotland has £9.4bn, and Barclays has £7.3bn. Lloyds Banking Group has £2.5bn and Standard Chartered £2.2bn. Together the undeclared losses total £31.8bn.

The research shows the distorting impact the accounting rules, which allow bad loans to remain hidden, have on bank results. PIRC applied old-style UK GAAP accounting rules, which applied for 100 years until 2005, to the figures released in the 2012 banks’ accounts.

Old rules, write off part of the loans as soon as you think they might, possibly, go bad. New rules, much stricter because the monocular twat didn\’t want banks creating bad debt reserves which reduced the tax take. The result?

Tim Bush, head of financial analysis at PIRC and long-term critic of IFRS, said: “The 12 months expected loss is neither here nor there. It is clear that bad loans in RBS and HBOS on lending in 2006 and 2007 took four or five years to come through, the 12 month view can still make unprofitable lending appear profitable. The FASB model is the model that is preferred by the Fed and already explains why the US banking system is now functioning properly, whereas the IASB banking world is not.”

Thanks Gordon.

One comment on “Another effect of Gordon Brown

  1. Indeed! This is the kind of analysis that draws the open minded to your blog Tim; thank you. Meanwhile in Ritchieland we’re getting lectures on how money is created “out of thin air” (because we simply don’t understand money supply). Apparently it’s all a confidence trick perpetrated by the high street banks (no mention of reserve banking). On which subject he has recently posted a letter to the Guardian from a professor of sociology (your fave subject I believe) arguing that, because this is debt, banks should be prevented from doing it.

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