A report from the Bank of England's Financial Policy Committee (FPC) has highlighted weaknesses with current accounting rules for allowing banks to disclose limited information in their balance sheets for crucial elements such as fair value calculations as well as inappropriate provisioning which prevent lenders from making allowance for losses down the line.

The report has also revealed that UK banks need to make provisioning for up to £15bn in extra provisions to raise coverage rations to bring expected losses for current loans up to more prudent levels.

A further £4bn to £10bn may also be necessary to make allowance for unrecognised payment-protection insurance claims and Libor-related costs.

Mervyn King (pictured), outgoing governor of the Bank and head of the FPC - tasked by the Chancellor with identifying, monitoring and taking action to remove or reduce systemic risks in the UK financial system - said that that it is now key for banks to have 'an honest and open statement of what the balance sheet is'.

'I do think that one of the things that's made confidence less secure than it would otherwise have been is just the sheer uncertainty about knowing how far these reported provisions are accurate or not,' King said, in relation to banks' provisioning for expected losses.

To read more indepth coverage of this story, read IASB scolded by Bank of England