Bank failures and accounting during the financial crisis of 2008–2009

Norton, Simon D. ORCID: https://orcid.org/0000-0001-8337-0944 2011. Bank failures and accounting during the financial crisis of 2008–2009. Jones, Michael, ed. Creative Accounting, Fraud and International Accounting Scandals, Chichester: Wiley, pp. 425-452. (10.1002/9781119208907.ch20)

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Abstract

This chapter examines the role of bank failures and accounting in the financial crisis of 2008–2009. The causes of failure of Hypo Bank, Fortis Bank, Kaupthing and Northern Rock are analysed. The main focus in the chapter is on the demise of three financial institutions, Lehman Brothers, BernardMadoff Securities, and Bear Stearns. Each of these three cases demonstrates the consequences of creative accounting in the context of balance sheets which did not accurately represent the value of collateral or the magnitude of the risk presented, and thus reported, to the wider investment community. It is highlighted that there are several causes for the recent credit crunch but the most important are the role of sub-prime lending, off-balance sheet activities by banks and inadequate risk evaluation of assets which ultimately turned out to be highly volatile and highly illiquid. It is argued that creative accounting played a major part in facilitating or making possible these practices.

Item Type:	Book Section
Date Type:	Publication
Status:	Published
Schools:	Research Institutes & Centres > Centre for Business Relationships, Accountability, Sustainability and Society (BRASS) Schools > Business (Including Economics)
Publisher:	Wiley
ISBN:	9780470057650
Last Modified:	26 Nov 2025 11:16
URI:	https://orca.cardiff.ac.uk/id/eprint/20293

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