Ireland’s central bank ‘likely to move on loan loss reporting’

IRELAND’S CENTRAL BANK is giving further thought to proposals to make lenders account for loans more prudently, Accountancy Age understands.

A source said the plan – which was mooted by the central bank as a way to rebuild confidence in the battered financial sector – could work in one of three ways.

First, it could try to enact the changes within the current framework of International Financial Reporting Standards. These call on banks to report incurred loan losses only, as opposed to those that are expected to go bad in future, a system that has attracted criticism from those who say it lacks prudence.

Secondly, the central bank could require lenders to revert back to the Irish Companies Act, believed by some to oblige more prudent recording of and provisioning for loans than IFRS.

Thirdly, a system might be set up whereby banks file company, rather than group accounts, meaning common law would override IFRS.

Earlier this month a central bank spokesperson said: “We are reviewing our powers and are taking advice from accounting experts.” A banking strategy paper is due to be published at the end of June.

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Fiona Westwood of Smith and Williamson.