Today, I had a long chat with Bob Garnett, a member of the London-based International Accounting Standards Board. Before joining the board, he was Executive Vice-President, Finance for the global miner Anglo American.

Now living in Johannesburg, Mr Garnett was scathing about the way the banks have blamed the subprime crisis and credit crunch on accounting rules. And he says there are major problems with disclosure. Read on.

SOX FIRST:How much have the accounting rules contributed to the subprime crisis?

GARNETT: About this much (indicating a zero with his fingers). What contributed to it is largely greed, short-termism and this focus on trying to develop complex instruments to create an investment opportunity. And with all these things that are going on, ultimately it's the banks that are looking for some relief and some bail out but it's the investors who are stuck with the investments who are the ones suffering the most.

SOX FIRST: So how much is the complexity in accounting rules creating the problem?

GARNETT:In that sort of market, it's not the standard that's particularly complex. It's become complex because people want to get some clarity on what they can and can't do. All the accounting standards are doing is trying to catch up with what the structuralists are doing in developing complex financial instruments. But it's not the accounting. What the accounting says quite simply in essence is that if you are developing instruments where you rely on market prices to see how they should be valued and how to compensate people for it, then use market prices in accounting as well. Banks don't always want to do that and that's what creates some of the mismatches that come through.

SOX FIRST: You said the credit crisis was caused by greed. Does that include the banks?

GARNETT: The banks are number one in greed. The banks are the ones who are developing all the financial products. They are the ones who are offering them, they are the ones who take the commissions out of the investors, pension funds, widows and orphans who happen to be at the end of the line and who don't necessarily understand the details of the products but believe in them. It seems odd to me that someone can lend money to somebody whose property is perhaps not worth the value of the mortgage being offered, the interest rate being charged on the mortgage is below the normal rate and that the individual doesn't have the income to repay the loan. To repackage that in a form that some people find a AAA investment is strange.

SOX FIRST: But some of the banks are blaming it on accounting rules.

GARNETT: To a large extent, it's a complaint about value because they are using the wrong values, it's not because they are using the wrong standard. If you write a sophisticated product and you can't observe its price in the market because it's not trading, then you must expect that there is some fallback.

SOX FIRST: People are concerned about the quality of disclosure and the IASB is looking at this right now. What's wrong with the level of disclosure now?

GARNETT: The problem with disclosure is that too many of them are tick the box and the annual reports have become overly long with no thought or consideration by the people that put it together, by the people that audit it, of what the users actually need and want. That's one half of the problem. The other half of the problem is that the people that want the information can't let go of anything they have had before so they want more disclosures about new things that are happening but also want to maintain all the old disclosures. So annual reports are now getting inordinately long because no one is focusing on what's important and what needs to be communicated. And it's a three legged stool. The third part is an attitude of mistrust by the users. If the information isn't being disclosed, then the investors think the companies are trying to hide something, even if it's not material. They like to see the information is there, to know it's immaterial themselves. At the same time, the bearers of financial reports say the accounting standards are telling you this story but the real story, the economic reality is the following. So what you are getting is two competing threads coming through in a financial report and that is adding to the confusion and complexity.