Policy options

Barclays is rightly paying a price for its weird accounting policy towards leveraged loans. Under international accounting standards, banks are obliged to decide at the moment a loan underwriting agreement is signed whether it intends to hang on to the loan, in which case it goes on to the banking book, or will be held as an asset for sale, in which case it goes on to the trading book. Assets on the banking book are valued at par and can only be marked down where there is evidence of impairment,...