Lord McFall of Alcluith
Main Page: Lord McFall of Alcluith (Lord Speaker - Life peer)Department Debates - View all Lord McFall of Alcluith's debates with the HM Treasury
(12 years, 9 months ago)
Lords ChamberMy Lords, the structure of the various bodies that fall under the Financial Reporting Council is a matter for the Financial Reporting Council. I do not believe for one minute that anything it does to the structure of the number of bodies under the FRC will weaken the very distinguished and important contribution which the UK makes to international standard-setting.
My Lords, has the fatal flaw not been the ability of banks and other financial institutions to book future projected income as profits—profits which did not materialise and on which bonuses were paid, thereby skewing the incentives of the whole financial sector industry? There is a time here for reassessment, and that is a black hole at the centre of these proposals.
Again, this is an important issue. The Government have taken significant steps to increase both the transparency and the FSA rules around the payment of bonuses. However, we should be careful about this. First, it is worth noting that under UK GAAP, before IFRS was introduced, banks were required to account at fair value for their trading portfolios. Of course, accounting at fair value requires assets to be marked both up and down. It is certainly the case that under IFRS there were certain portfolios that previously would not have been counted as trading portfolios, which now are. However, we have to be very careful about attributing all that went on with banking bonuses to the accounting requirements. If I may suggest so, that was a small part of what was undoubtedly a series of inappropriate behaviours at the heart of the industry.