International accounting standard-setters have at last recognised the error of their ways and relented on the question of prudence, which the International Accounting Standards Board (IASB) now plans to re-instate as a fundamental accounting principle. Bank auditors will have to form an independent view on loan recoverability, rather than rely on the potentially biased judgments of management.

A regime that allows banks to flatter revenues by failing to recognise loan losses until actual default, instils a cavalier culture, in which dodgy high-risk activity is treated as the norm.