Major UK banks cannot currently afford to loan the amount of money needed by the country's business sector because they have billions tied up in undeclared losses.
That is according to new analysis released today (6 June) by shareholder advisory group PIRC, which involved scrutinizing the 2011 accounts of the country's five biggest financiers, the Daily Telegraph reports.
This research was conducted in order to find out how much these companies expect to have to write off in bad debts over the course of the next 12 months.
And it was found that collectively, the Royal Bank of Scotland (RBS), Barclays, HSBC, Standard Chartered and Lloyds Banking Group are sitting on around £40 billion ($62 billion) in such funds.
For instance, RBS is currently maintaining some £18 billion in undeclared losses, while HSBC and Barclays have £10 billion and £6.7 billion respectively.
Tim Bush, head of governance and financial analysis at PIRC, commented: "The scandal is the fact that banks are delaying de-risking and de-gearing due to the accounting standards."
By Claire Archer