BANKS may need their own accounting rules and governance codes to restore investor trust in the sector, the country’s audit policeman said yesterday.
Accounting firms are on the back foot after they gave banks a clean bill of health just weeks before many had to be rescued by taxpayers in the 2007-09 financial crisis.
Banks were audited using rules applied to all sectors and Financial Reporting Council (FRC) chief executive Stephen Haddrill said this may have to change given what happened.
“To what extent, for the purposes of our work, should banks be regarded differently?” Mr Haddrill told a conference organised by accounting firm Ernst & Young.
“Should they have a separate code and their own accounting standards?” Mr Haddrill said, adding the need was not “evident” for now but the FRC has set up a working group to study this.
There was a “real challenge to investibility” in banks and lenders should make greater use of disclosures in financial reports to win back market trust, Mr Haddrill said.
In June, Andrew Haldane, director of financial stability at the Bank of England, which will regulate lenders from next April, said the UK needs separate accounting rules for banks for investors to properly evaluate risks.
Mr Haddrill said he was nervous about introducing more rules which could be manipulated or foster the herd mentality seen in the run-up to the crisis.