Banking: Accounting Standards

Lord Lawson of Blaby Excerpts

Monday 19th March 2012 Lords Chamber

[Lord Sassoon]

My Lords, having a look at accounting standards in relation to banks is certainly significant. I would not go as far as saying that IFRS had a fundamental role in relation to the financial crisis. There is not significant evidence of that although, as I have had it rather neatly described, you could perhaps describe accounting standards as an accomplice after the fact rather than as being responsible. There are issues that very much need to be looked at. The review that the IASB is doing, very much with the encouragement of the G20, of the financial instruments standard known as IFRS 9, the work that the Financial Reporting Council is doing, which I have referred to, the inquiries coming out of your Lordships’ committee and the most recent hearing last week will all contribute to an important ongoing debate.

[Lord Lawson of Blaby]

My Lords, is my noble friend the Minister aware that my noble friend Lord Flight is on to a very important point? It is quite clear that accounting standards have created a major reduction in stability in the banking sector. They had a major part to play, and IFRS has simply made this worse. Has my noble friend the Minister read the Hansard report of the debate in the Grand Committee of Wednesday last week, in which these matters were among those discussed? If not, will he please do so and will he also listen to what Mr Andy Haldane, the director of banking stability at the Bank of England, which is responsible for these matters, has had to say on them?

[Lord Sassoon]

My Lords, I have not read every word that was said in the Committee last week, but I have certainly read the very interesting remarks of my noble friend Lord Lawson of Blaby and the very challenging seven proposals that he made, many of which the Government are already acting on in the structure of banking and regulation. I do not dismiss this issue at all, but there is a tension between the transparency and other requirements of investors on the one hand and the requirements of prudential regulators on the other. There are very difficult issues of conflicting objectives here, which it may be impossible for one set of figures fully to reconcile. However, I take my noble friend’s suggestions very much to heart.