Mervyn King to challenge bank accounting that fails to show true level of risk Sir Mervyn King told MPs that the Bank's Financial Policy Committee (FPC) will raise concerns that bank balance sheets fail to give an "accurate representation" of their liabilities and strength. The division, set up by George Osborne to spot risks building in the financial system, is due to report its quarterly findings tomorrow . The Governor, who chairs the FPC, told the Treasury Select Committee that there was "undoubtedly a concern" over the way banks presented their accounts. He said a "fundamental question" was "to what extent are the balance sheets giving an accurate representation of the underlying position of the banks?" The IASB has admitted that, by requiring banks to provide more for poor loans, the new rules are likely to force the banks to raise billions of pounds of fresh capital. But the rules could take more than a year to come into force. A move by the FPC would signal that the Bank is prepared to leap-frog the IASB to demand faster change. Bank analysts welcomed the FPC's move but want greater clarity. Asked by MPs about forbearance [relaxing debt terms], Sir Mervyn said there was "good forbearance ... when banks feel 'look, this company does have a long-run future, let's not put it in a difficult position now."" But also: "Bad forbearance is where the banks don't insist on repayment not because they care about their customer but because they're worried about the implications for their own balance sheet, given the accounting conventions under which banks operate." He told the MPs: "That is undoubtedly a concern, because the issue is - this is the fundamental question we'll come back to on Thursday - to what extent are the balance sheets giving an accurate representation of the underlying position of the banks?"