Stop using accounting as a scapegoat says FRAC chair

ACCOUNTING has been unfairly blamed for the poor judgements of bank boards and regulators in the run up to the financial crisis, the chair of the Financial Reporting Analysis Committee and chief executive of the CFA Society have claimed.

In a letter sent to the Financial Times, the FRAC’s Jane Fuller and Will Goodhart of investment association CFA said that banks “over-distributed to staff and shareholders, supressing the level of loss-absorbing equity” in pursuit of return on equity.

According to Fuller and Goodhart, this is the fault of boards and not numbers.

“Blaming IFRS for poor judgement on bank capital and distributions to staff and shareholders is like blaming a tape measure for failure to build flood defences high enough,” they said.

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Fiona Westwood of Smith and Williamson.