Merrill Lynch warned today that some of the UK's biggest banks could be hit hard by new International Accounting Standards (IAS).

The most affected is the Earnings Per Share, that favourite of 80's business. Up to 17 major European banks, including Lloyds TSB, Royal Bank of Scotland and Barclays would be see their adjusted earnings per share fall. The calculations are based on the results of 2003.

Changes include bringing derivatives onto the balance sheet

Worst hit would be the Royal Bank of Scotland which would see a fall of 6.8% in adjusted EPS.

Barclays fares badly ate 3.8% because of higher pension charges due to FRS 17/IAS 19. Expensing of share options.

All is not doom and gloom. Abbey would benefit massively due to an increased contribution from its Life Assurance busines.

Changes such as the move to IAS are arriving at the door of the banks at an ever increasing rate. The new Basel II accord is to be published imminently, this will affect regulatory capital. Sarbanes-Oxley affects every bank that wants to list in the States.

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