It would go some way to explaining why lending figures are still so abysmal, as shareholder group PIRC says it has calculated the total of bad debts that banks may be forced to write off in the future, but which they have not yet incorporated into their balance sheet.
The total, by bank, is:
- HSBC: £10.4bn
- RBS: £9.4bn
- Barclays: £7.3bn
- Lloyds Banking Group: £2.5bn
- Standard Chartered: £2.2bn
PIRC reached these figures by applying the old UK GAAP (Generally Agreed Accounting Principles) rules to the banks’ 2012 accounts. The rules were the standard for a century but were abandoned in 2005. Now, bad loans and future expected losses do not have to be shown on the accounts according to the International Financial Reporting Standards.
PIRC head of financial analysis, Tim Bush, said: ‘The 12 months expected loss is neither here nor there. It is clear that bad loans in RBS and HBOS on lending in 2006 and 2007 took four or five years to come through, the 12 month view can still make unprofitable lending appear profitable.’
So it seems that banks are, perfectly legally, able to manufacture better-looking results. And all the while, they’re still not lending.
Top work, chaps.