Mark-To-Market Manipulation Hides $90 Billion Losses For UK Banks

Tyler Durden's picture


Some have attributed the resurrection of the financial markets (or more appropriately the banks) from the March 2009 lows to the IASB/FASB changes to factual to fantasy accounting. The Telegraph reports today that from PIRC's and the Bank of England's Financial Policy Committee that while banker bonuses continue to rise (for now), 'hidden' losses among UK banks could total GBP60 Billion (USD 90 Billion). HSBC topped the list with GBP10.4 Billion in bad debts that have yet to be written off and while the 'accounting' bodies are suggesting they will address criticism of this farce, as one analyst notes, they "can still make unprofitable lending appear profitable." Regulators expect to hear plans from lenders on how they intend to fill these holes before the end of the month to coincide either with the FPC’s meeting on March 19 or a statement scheduled for March 27. While outright recaps are unlikely, banks are expected to
restructure and set out plans to raise their capital levels over the next
couple of years. More fantasy...


Via The Telegraph,

PIRC has calculated the amount of bad debts the banks may have to write off in coming years but have yet to subtract from profits, together with other items such as deferred bonuses not booked.


HSBC, which is the biggest bank by assets, was shown to have £10.4bn of hidden losses, the Royal Bank of Scotland has £9.4bn, and Barclays has £7.3bn. Lloyds Banking Group has £2.5bn and Standard Chartered £2.2bn. Together the undeclared losses total £31.8bn.


The research shows the distorting impact the accounting rules, which allow bad loans to remain hidden, have on bank results.




Apart from Basel rules that require banks to declare half the expected losses over a year, bad loans and expected losses do not appear in the banks’ accounts under International Financial Reporting Standards (IFRS).


Last week the London-based IASB, which sets accounting rules for all listed companies in a raft of countries, agreed to address criticism of IFRS with plans for tougher capital requirements against expected losses. However, the provisions only have to be for losses expect over 12 months. The US Financial Accounting Standards Board (FASB) changed its rules in December to demand provisions for the life of the loan, as UK GAAP did too.


Tim Bush, head of financial analysis at PIRC and long-term critic of IFRS, 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... ”


The warning follows regulatory pressure to force the UK’s banks and building societies to disclose their hidden losses, which supervisors at the Bank of England have suggested could total as much as £60bn. Lenders have just weeks left to clarify present the regulators with plans to fill the holes.




An announcement on the industry’s response is expected before the end of the month to coincide either with the FPC’s meeting on March 19 or a statement scheduled for March 27.


Outright recapitalisations are unlikely, though. Banks are expected to restructure and set out plans to raise their capital levels over the next couple of years.


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Tue, 03/12/2013 - 13:40 | 3323003 DoChenRollingBearing
DoChenRollingBearing's picture

AND coming to a US bank near you soon.

Get some electronz outa there, bitchez!

Tue, 03/12/2013 - 13:48 | 3323042 MillionDollarBonus_
MillionDollarBonus_'s picture

Mark-to-market accounting is not necessary for SIFIs (Systemically Important Financial Institutions) because they are able to sell their liabilities to central banks around the world at more appropriate valuations. This is what doomer libertarians simply do not understand. I know many on this site do not want to hear this, but these banks are simply too big to fail, and thankfully central banks around the world recognize this.

Tue, 03/12/2013 - 13:52 | 3323058 francis_sawyer
francis_sawyer's picture

When you have been granted the franchise on counterfeitting money for yourself, you'll do anything you can to make people understand that you're TOO BIG TO FAIL...

Tue, 03/12/2013 - 14:49 | 3323274 markmotive
markmotive's picture

We are all slaves of private money creation and the banking system.

Money is debt, gold is money

Tue, 03/12/2013 - 19:54 | 3324320 rotagen
rotagen's picture

What makes anyone think that gold would make any difference.  It's not the medium, its the swine that are in charge of the scam that need to broiled. They could rig a scam using guano as money.  Gold ain't shit except a way to poison vast areas of rainforest.  Clue in.

Tue, 03/12/2013 - 13:58 | 3323081 DoChenRollingBearing
DoChenRollingBearing's picture

MDB, that sets up hyperinflation IMO.  THIS doomer libertarian buys gold for that eventuality.

And, would not the entire morality of SIFIs existing in the first place be in doubt?

Tue, 03/12/2013 - 14:13 | 3323138 EscapeKey
EscapeKey's picture

LOL - one of your better ones; 8/10

'appropriate valuations'

for whom exactly?


Tue, 03/12/2013 - 14:22 | 3323163 falak pema
falak pema's picture

you have understood the true value of electronic money; like beauty, it is determined by the eyes of the CB beholder; the all knowing. 

It is very difficult for people with HUGE egos to understand that :  I,I,I,I...I deserve the Oscar.

Tue, 03/12/2013 - 15:01 | 3323350 lasvegaspersona
lasvegaspersona's picture

Fiat is a good functional Medium of Exchange. The problem comes when we are told to hold it as a Store of Value. As an SOV, electrons and paper just don't cut it. Ultimately the world will figure this out and seperate the MoE from the SoV functions. Until that happens we are stuck with the great lie: 'the dollar is as good as gold'....never was, never will be...

Tue, 03/12/2013 - 13:40 | 3323004 SilverDoctors
SilverDoctors's picture

Jim Willie is all over this, he says a european bank triggered collapse is imminent!


Jim Willie: The Collapse is At Our Doorstep!

Tue, 03/12/2013 - 13:41 | 3323012 DoChenRollingBearing
DoChenRollingBearing's picture

Uber-bear Jim Willie is one of my favorite reads.

Tue, 03/12/2013 - 13:42 | 3323015 SilverDoctors
SilverDoctors's picture

He missed the call last summer than Morgan Stanley was going tits up, but a good majority of his macro calls are spot on

Tue, 03/12/2013 - 13:43 | 3323020 DoChenRollingBearing
DoChenRollingBearing's picture

I am off to read your interview with him now, + 1.

Tue, 03/12/2013 - 13:45 | 3323034 Rubicon
Rubicon's picture

Henny Penny Willie

Tue, 03/12/2013 - 14:21 | 3323160 akak
akak's picture

Pangloss Krugman

Tue, 03/12/2013 - 13:53 | 3323062 DoChenRollingBearing
DoChenRollingBearing's picture

EXCELLENT interview SilverDoctors, well done.

Highly recommended reading to all.

Tue, 03/12/2013 - 14:59 | 3323340 ParkAveFlasher
ParkAveFlasher's picture

I'd read the latest J-Willie, but I'm fresh out of mescaline.  What to do?

Tue, 03/12/2013 - 13:41 | 3323011 TheSilverJournal
TheSilverJournal's picture

Market? What's that?

The omnipotent central planners with their infinite wisdom and PhD's know better than the market which is why I am very thankful and gracious they set prices now...

Tue, 03/12/2013 - 13:42 | 3323016 Xibalba
Xibalba's picture

Not too big for Big Ben!

Tue, 03/12/2013 - 13:42 | 3323017 G_T_A_44
G_T_A_44's picture

'hidden' losses among UK banks could total GBP60 Billion (USD 90 Billion).  X 100 Multiplier

Tue, 03/12/2013 - 13:42 | 3323019 Dr. No
Dr. No's picture

Fractional reserve banking is the issue.  They are lending out money they dont have; lent long and borrowed short.  If they were only allowed to loan out money what was not on-demand deposits, this would not be an issue.

Tue, 03/12/2013 - 13:50 | 3323048 TheSilverJournal
TheSilverJournal's picture

Agreed. Everyone hates on fractional reserve banking, but it's really not having enough in the vaults to back the demand deposits that's the issue. If they stopped lying to the demand depositors and depositors knowingly took the risk to be time depositors, who am I to say that two parties that aren't lying to each other shouldn't do a deal?

Tue, 03/12/2013 - 13:50 | 3323024 hedgeless_horseman
hedgeless_horseman's picture



Hiding $90 Billion in losses?  Pfffttt.

"They were just kids bankers out having fun, not kids bankers into gangs, no drugs involved," Williamson said. "They're just kids bankers doing what we all did at one time."

No mo' consequences.

The 19-year-old woman behind the wheel of an allegedly stolen SUV when it crashed into a pond, killing six friends, didn't have a valid driver's license, according to a report on the crash released Tuesday.


Lisa Williamson said her son, Brandon Murray, and his best friend, Ramone White, both 14, each told their parents they were sleeping at the other's house but then ended up at what the young folks call a :kick-back": a small gathering of friends, less than a party but more grown-up than a sleepover. Something to do on weekends after the mall closes and the last movie lets out.


They were probably trying to catch a ride home in the stolen SUV.


"They were just kids out having fun, not kids into gangs, no drugs involved," Williamson said. "They're just kids doing what we all did at one time."

Our children look to us to set an example.  How do we expect them to behave when stealing is no longer a crime (Jon Corzine)?


Tue, 03/12/2013 - 13:51 | 3323052 Son of Loki
Son of Loki's picture

I musta been abby normal as a kid. I never stole anything when I was "growing up" let alone an SUV.

What a culture.

Tue, 03/12/2013 - 13:55 | 3323071 DoChenRollingBearing
DoChenRollingBearing's picture

Yes, I missed all of that too.

Tue, 03/12/2013 - 15:04 | 3323374 ParkAveFlasher
ParkAveFlasher's picture




Tue, 03/12/2013 - 14:00 | 3323072 hedgeless_horseman
hedgeless_horseman's picture



Authorities were awaiting the results of drug and alcohol tests on the dead teens.

Why?  Doing drugs as a teenager is ok!  It's cool, and you may even become POTUS!


Tue, 03/12/2013 - 14:01 | 3323094 DoChenRollingBearing
DoChenRollingBearing's picture

h_h quotes:

"Authorities were awaiting the results of drug and alcohol tests on the dead teens."

LOL for that and your pictures.

Tue, 03/12/2013 - 14:03 | 3323100 akak
akak's picture

You didn't roll that doobie ... somebody else did that.

Tue, 03/12/2013 - 14:18 | 3323152 falak pema
falak pema's picture

such outright hero worship is unhealthy.

Tue, 03/12/2013 - 13:44 | 3323029 Byte Me
Byte Me's picture

Any restructuring will, of course, not affect any parasite's bonus.

Tue, 03/12/2013 - 13:47 | 3323039 Cursive
Cursive's picture



while the 'accounting' bodies are suggesting they will address criticism of this farce


The accounting "bodies" are the ones who need to be hanging from the lampposts.  Start with the enablers, finish with the theives.

Tue, 03/12/2013 - 13:50 | 3323051 ziggy59
ziggy59's picture

The banksters should be given pulitzers for their ability to write fiction

Tue, 03/12/2013 - 13:53 | 3323066 madcows
madcows's picture

Everything is ok in the land of make believe.

Tue, 03/12/2013 - 14:03 | 3323101 yogibear
yogibear's picture

It's been mark to fantasy in the US for a while.

In the US we have skittle-pooping unicorns and helicopter Ben's magic money.

Tue, 03/12/2013 - 14:04 | 3323103 knukles
knukles's picture

Y'all think it's just European Banks?
Hows about any banks world wide?
How's about any supranational fund, pension schemes, governmental trusts funds?
Ill St Pensions, CalPers, US Indian Trust Funds. SS, whatever?

Everyday that goes by just seems to bring more errors, problems, glitches, rogue personnel (always way down the ladder, BTW) that one might, just might conclude that the whole system has been jury rigged, broken, that normalcy is but a mere illusion.
I sure hope not!
Pray for the best, plan for the worst.

Tue, 03/12/2013 - 14:16 | 3323145 falak pema
falak pema's picture

You seem to realise that these pension funds are ALL locked into the holy market of markets of the bankstas; our best and brightest libertarians with big bonuses. 

Nowhere to run nowhere to hide! and when the churn gives no return the debt keeps piling up and the pensions start to melt like under global financial warming...Who says that financial warming is restricted to ONE continent?

Lol, the delusion of libertarian minds; never in my back yard! Let those euros burn in Italy not in our back yard.

Electronic balance sheets know no frontiers. Musical chairs...until the music stops.

Tue, 03/12/2013 - 14:08 | 3323119 falak pema
falak pema's picture

but but but, the financial sector is the epitomy of libertarian culture...why can't banks make more money?

Freedom without responsibility...just neat freedom fries for us; and let the people eat mud. 

Tue, 03/12/2013 - 14:24 | 3323170 darteaus
darteaus's picture

HSBC hiding $15B of bad loans?

OK, but I'm sure the physical Au backing up GLD is still there....BWA-HAHAHA.

Tue, 03/12/2013 - 14:33 | 3323200 slightlyskeptical
slightlyskeptical's picture

Had a dream they went belly-up. Very real. Was back in 2005-2006. In the dream I heard it on the radio as i left a place after collecting a six figure check.

I actually put a lot of faith into it as other stock specific dreams have been spot on to date.

This is one I hope comes true as i think the banks need to fail and i need a big check.

Tue, 03/12/2013 - 14:26 | 3323177 tony bonn
tony bonn's picture

"...'hidden' losses among UK banks could total GBP60 Billion (USD 90 Billion)..."

ain't nothing but a thang.....uncle ben will bail them out just as he did in january with 1.2 trillion usd worth of fx get the debt and banksters get the loot

Tue, 03/12/2013 - 14:45 | 3323266 Gamma735
Gamma735's picture

MDB is a true artist.

Tue, 03/12/2013 - 14:50 | 3323288 Michelle
Michelle's picture

There is no such thing as bank losses since the central banks will buy anything that looks remotely like a steaming pile of shit.

Anybody notice how Corelogic's stats on residential real estate shadow inventory is at 2.3 million units as of October 2012 which is a rise from April 2012 with 1.5 million units? Of course both reports highlighted declining inventory but no one pointed out that the base was from the prior year, not from the last report. More spin as usual.

Just a usual day in the land of OZ, all fantasy and make believe. Can someone please drop a house on Bernanke?


Tue, 03/12/2013 - 14:55 | 3323317 Tombstone
Tombstone's picture

What are they trying to do over there?  Copy the US and China?

Tue, 03/12/2013 - 15:05 | 3323379 IamtheREALmario
IamtheREALmario's picture

Why must the STAWK market be propped up at all cost? Because the crony banks own (directly or indirectly) the vast majority of stocks and so any major fall in the stock market would cause a mark to market and derivative catastrophic cascade.

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