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New accounting rules should be introduced says expert

Separate accounting rules banks to allow investors and regulators to properly evaluate risks should be introduced as the current ones are baldly flawed, according to one Bank of England official.

Writing in the Economia accounting and business magazine, Andrew Haldane criticised the hit and miss and view of the solvency of banks.

Mr Haldane said that the current rules on accounting in the UK were flawed, likening an attempt to gain an accurate view of a bank’s assets to trying to “pin the tail on a boisterous donkey,”.

The uncertainty caused by the financial crisis also indicates that the flighty liabilities and uncertain assets of banks were a dangerous mix.

He commented: “If they are to be useful to investors, banks’ financial statements need to capture those fragilities so that risk can be priced.

“This calls for accounting rules that properly recognise the special characteristics of banks’ assets and liabilities. IFRS requirements currently fall short of that objective.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .