The Local Authority Pension Fund Forum (LAPFF) is recommending its members challenge Royal Bank of Scotland (RBS) at next week's AGM over concerns that the bank's report and accounts do not give a true and fair view of its financial position.

The Forum calculates that undisclosed losses at RBS may total £10bn, but says neither the bank's annual report nor its EGM circular disclose what the capital gap is, something which is now required under new Bank of England guidelines.

LAPFF, which represents 56 public sector pension funds, says there 'persistent concerns' about the valuation of the bank's assets, and the lack of any reference in the report and accounts to the corrective measures required by the Financial Policy Committee to deal with the matter.

As a result LAPFF has recommended members oppose the report and accounts at the bank's AGM on 14 May. The Forum has also recommended that members oppose resolutions at the bank's EGM seeking authority to issue equity convertible notes, as it believes it is difficult to support resolutions relating to capital structure when the bank is not transparent about what its capital is.

LAPFF maintains the introduction of international financial reporting standards (IFRS) has distorted the financial position of RBS and other banks. It says the move from an expected loss to an 'incurred loss' basis has meant a substantial amount of lifetime expected losses are now omitted from the accounts, which it says is particularly relevant to banks with high risk lending, like RBS.

Forum chairman councillor Kieran Quinn said: 'It is LAPFF's view that the application of IFRS to the UK's banks has been nothing short of disastrous, and we continue to raise our concerns with fellow investors and policymakers. In the meantime, where we consider that financial reporting in line with IFRS falls short, we will encourage our members to vote against it.'