Clause 40 - Derivative contracts: property total return swaps etc

Part of Finance Bill – in a Public Bill Committee at 3:15 pm on 4 June 2013.

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Photo of Steven Baker Steven Baker Conservative, Wycombe 3:15, 4 June 2013

Notwithstanding the hon. Gentleman’s opening remarks, one of the things that has excited me over the course of my short parliamentary career has been the international financial reporting standard and its effect on derivatives: the mark-to-market accounting rules within it incentivised banks to transact in derivatives, in particular because they can up-front unrealised cash flows to manufacture profit and capital. Without going too deeply into that, I would refer the Minister to a book called “The Law of Opposites” by my colleague Gordon Kerr, who has created that kind of product. Have the Government assessed whether IFRS accounting is incentivising the creation of these derivative contracts? If so, will they look at amending those rules, not just to address this problem but in the interests of the wider banking system?