IFRS changed that: what it said was that loan losses should only be booked as they were incurred. So, unless and until a loan actually went bad nothing should be done about it in accounting terms even if it was entirely anticipatable that it would, at least in part, fail. This measure also had the net impact of reducing general loan provisions that recognise that some loans will fail, but you just don’t know which ones as yet.
The 2005 changes had a massive impact on bank profits: they rose enormously. This in turn had a massive impact on the economy. Bank loans could be offered to people who may not be able to repay without any impact on current reported profit: in fact, the upside of fees and charges could be taken immediately and the losses could be deferred. So, not only did profits increase, and with that bonuses, the share price, stock option valuations and so much more that all favoured bankers in the short term, but risk for everyone else rose at the same time. Banks did, effectively, dump their risk on the rest of us.
They also obviously massively overpaid corporation tax but strangely, Ritchie doesn’t mention that.