Bradford & Bingley has issued a thinly veiled criticism to IFRS after suffering a £49.7m fair value loss on the worth of its assets in the wake of the credit crunch.
In its preliminary results statement, the bank said that it had taken a £64.2m impairment on its £125m stake in structured investment vehicles, and also wrote down £30.2m of CDOs, the mortgage-backed debt packages offered to investors which have some exposure to the US sub-prime market.
The FTSE 250 company said:'The volatility of interest rates and asset prices has brought changes to accounting for financial instruments implemented under the transition to IFRS into sharper focus in 2007.
'Where in previous periods these movements have been immaterial, in 2007 the group's income statement contains a number of fair value movements that are more significant. These fair value movements introduce volatility to reported profits and are therefore not included in the underlying profit of the group.'
The fair value loss of £49.7m came about from derivatives contracts linked to the CDOs losing value. Bradford & Bingley's 2007 fair value loss dwarfs the £0.1m it weathered in the year to 31 December 2006.
Bradford & Bingley has a relatively small exposure to SIV's and CDOs but other banks with riskier positions may take a much larger hit when they release their figures in the next fortnight.
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