Mr. Cormac Butler:

I should add that the IAASA and the ODCE are on record as stating that their interpretation of the law is that banks can delay the recognition of losses under IAS 39. They cannot, therefore, operate as regulators. If that is their interpretation, they can only penalise bankers who are not following their interpretation of the law. This came up at the FRC. They have been accused of letting major disasters go unchecked. As they are on record as stating that banks are allowed to delay the recognition of losses they become ineffective as regulators. I will not go into the engineering as to whether there should be self-regulation, but if they hold this view they cannot operate as regulators.

If they are told that the law says all losses must be recognised and, therefore, any banks that do not do so are penalised, they would be much more effective.