Royal Bank of Scotland Group Plc investors should oppose the firm’s annual report and accounts because the lender may not be valuing its assets correctly, the U.K. Local Authority Pension Fund Forum said.
RBS may have undisclosed losses of 10 billion pounds ($15.5 billion) under current accounting rules, which allow banks to understate potential losses on bad loans, the U.K. pension fund lobby group said in a statement today. Linda Harper, a spokeswoman for RBS, declined to comment.
“LAPFF has repeatedly raised concerns that the financial position of RBS, and other banks, is distorted by International Financial Reporting Standards,” LAPFF said in the statement. “As a result, a substantial amount of lifetime expected losses were missing from U.K. banks’ accounts. This was particularly relevant to banks with high-risk lending, like RBS.”
Last month, the lobby group said Barclays Plc shareholders should oppose that bank’s annual report and accounts on concern that IFRS accounting standards allowed it to overstate its profits and could have been used to justify executive bonuses. The report was approved by investors at Barclays’s annual general meeting in April. RBS, Britain’s biggest government-owned lender, is scheduled to hold its AGM on May 14.
In March, the Bank of England said U.K. lenders needed to raise 25 billion pounds of additional capital to cover bigger potential losses on commercial real estate, possible fines for mis-selling and stricter risk models. RBS said last week it had not yet been told by regulators if it needs to bolster capital.
Shareholders of RBS should also oppose the bank’s proposal to issue bonds that would become equity in a crisis because the bank hasn’t been transparent about its capital position, LAPFF said.