Political Pressure to Help Banks 'Damaging Accounting Standards'
POLITICAL interference to give banks an easier ride over credit crunch losses risked damaging the credibility of accounting standards, experts said yesterday Changes made by the International Accounting Standards Board over the banks' treatment of losses last month, came after pressure from the European Commission, MPs on the Treasury Select Committee heard.
The hurried changes allowed banks to treat complex financial instruments hit by the crunch in a way that did not reflect their tumbling worth under "fair value" accounting rules. And banks have been quick to take advantage of the new measures.
In recent updates, HSBC said its pre-tax profits would have been EUR835m (pounds 534m) lower without the change, while Royal Bank of Scotland also gained a pounds 1.2bn boost from the amendment.
The IASB's move came amid commission concerns that European banks were subject to tougher standards than US counterparts - and threats of even more drastic changes to the rules.
Sir David Tweedie, chairman of IASB, considered resigning over the interference, which he said could set back plans for a worldwide set of unified accounting standards by a generation.
Paul Boyle, chief executive of the Financial Reporting Council, told MPs: "It is extremely damaging if in effect standards are made by politicians for political reasons. …