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Tuesday, March 12, 2013

The £60BN Banking Black Hole

The shareholder group PIRC has done a calculation that warns of a potential black hole in the accounts of British banks, relating to 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.

Amongst those with potential black holes are HSBC with £10.4BN of hidden losses, the Royal Bank of Scotland with £9.4BN and Barclays with £7.3BN.

PIRC applied old-style UK GAAP accounting rules, which applied for 100 years until 2005, to the figures released in the 2012 banks’ accounts.

Basel rules require banks to declare half the expected losses over a year. However, bad loans and expected losses do not appear in the banks’ accounts under International Financial Reporting Standards (IFRS).

The Telegraph reports that the Bank of England has suggested the total could amount to £60BN.

This needless to say means that those politicians who hope that banks will increase lending are pissing in the wind, as banks are scrambling to build up their balance sheets in preparation for the next self inflicted financial disaster (such as PPI mis-selling).

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