MPs attack RBS’s ‘distorted’ IFRS accounting

MPS HAVE WRITTEN to Royal Bank of Scotland to accuse it of using International Financial Reporting Standards to favourably distort its financial position by as much as £25bn.

This further attack on banks’ accounting has been spearheaded by Steve Baker MP – who recently raised a private members bill calling for lenders to prepare dual accounts to encourage prudence – and former Tory front-bencher David Davis.

The letter underlines differences between RBS’s expected losses and those calculated by accountants of the government’s Asset Protection Scheme, of which RBS is a beneficiary, The Daily Telegraph reports.

Banking specialist Gordon Kerr is the technical expert behind the complaint; he claimed there are inconsistencies between IFRS and UK company law and argued the old UK GAAP system forced banks to account more prudently.

The authors have warned that RBS accounts could be inflated by as much as 50% of the core tier one capital, meaning “on a prudent basis, RBS has a basic capital ratio (leverage on total assets) of 2.75% rather than 5.5% as stated.”

RBS has claimed it is following the standards correctly and said its accounting is in line with other financial institutions.

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Fiona Westwood of Smith and Williamson.