Since the transition to IFRS, a further 4 billion euros in costs had been charged directly to shareholders' equity and "9 billion euros has not been accounted for at all by banks that adopted the corridor method at January 1, 2004."

When banks transferred to IFRS in January 2004, they set their books to zero, charging past actuarial losses to their accounts.

"But in less than two years they have developed 9 billion euros of further actuarial losses. That's a hug sum of money for a short period of time," said Khamoo.

The report said the risk arising from defined-benefit pension obligations amounted to an additional visible risk to many financial institutions "along with the more traditional banking factors of credit and market risk."

Lloyds Bank (LLOY.L) had the highest pension obligations as a percentage of shareholders' equity at more than 160 per cent at the end of 2005. Commerzbank (CBKG.DE) had the lowest, at around 20 per cent.

The overall net deficit for the banks in the survey rose by 16.7 per cent over 2005.

The corridor method was adopted by 35 of the 44 European banks in the survey and the banks that did not adopt it were mostly based in Britain and Ireland.

United States accounting requirements are more onerous regarding pensions liabilities.

"The FASB (Financial Accounting Standards Board) came up with new standards which are effective for US public companies from December 2006 and they have to record the whole funded status into the balance sheet," said Khamoo.

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