Woolf: institutionally gullible

Accounting provisions for loan losses lie at the heart of collapses of financial institutions in recent years, argues Emile Woolf FCA

All those banks and financial institutions that have gone bust or been bailed out over the past 20 years demonstrate that the sector’s corporate conduct has been wayward, to put it mildly.

Loan loss provisioning throughout this period was based on the incurred loss model, so-called because no loss provision was required until management itself judged that a loan was irrecoverable.

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