American Bankers Association criticises IASB and FASB
The American Bankers Association (ABA) has criticised the US Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) for trying to reform mark-to-market accounting too quickly and the increasing divergence between their approaches.
“The rapid pace at which both organisations are working, as well as the directions in which they are heading, are causing some to question whether there is due process in evaluating these important issues,” wrote the ABA in a white paper, The current pace and direction of accounting standard setting.
While conceding changes to accounting rules are “urgently needed”, the ABA claims some reforms under consideration could cause disruption, particularly to smaller firms.
“A major concern is that the current directions in which the FASB and IASB are moving appear to be similarly requiring more mark-to-market accounting within financial statements, more capital for existing banking activities and more operational challenges to comply with these rules for banks of all sizes. The cost of accounting compliance puts continued participation in certain market activities at risk for some smaller institutions,” the ABA wrote.
On July 14, the IASB released its exposure draft on the classification and measurement of financial instruments, which will trim the number of measurement categories from four to two: amortised cost and fair value. The FASB plans to issue its own exposure draft in the first half of 2010, which is expected to call for all loans and securities to be marked to market on balance sheet.
The practice of mark-to-market accounting has proved highly contentious during the past two years. Its critics argue that forcing banks to mark assets at less than their true economic value is procyclical and exacerbated the difficulties firms faced during the crisis. ABA says the two boards’ plans to extend the practice is in direct opposition to the Group of Thirty and Financial Stability Forum, which have recommended more counter-cyclical policies.
While the two boards have come under intense political pressure to reform accounting rules, the ABA is concerned “the FASB and the IASB are moving on similar projects, but with different solutions, at different speeds and with different timing for finalising their rules”. The ABA argued that working to different time schedules (as evidenced by the FASB lagging behind the IASB on the financial instruments classification issue) could cause international divergence.
Additionally, the ABA says better co-ordination on reform is needed between the accounting boards and other financial regulators to ensure an “orderly market transition”.
See also: Banks' own credit risk hampers financial results
IASB and FASB differ on approaches for accounting standard overhaul
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
FRTB start dates must align globally, says European Commission
Lawmaker could trigger delay to market risk rules in Europe if US implementation drags on
Fed green lights more capital relief trades
Five US banks authorised to issue repeat credit-linked notes backed by financial guarantees
Basel III endgame: why moving fast might prove better for banks
Republicans are pushing for reproposal, but a rapid finalisation may prove less far-reaching
Isda pushes to ‘decouple’ Simm calibration from model changes
Emir 3.0 prompts effort to separate risk-weight revisions from methodology updates
Basel war on window-dressing may smooth liquidity, at a price
Changes to G-Sib charge could curb year-end repo volatility, but also cut balance sheet capacity
One year on, regulators still want a cure for bank runs
Broad support for higher outflow assumptions on uninsured deposits, but that won’t save insolvent banks
Watchlist and adverse media monitoring solutions 2024: market update and vendor landscape
This Chartis report updates Watchlist monitoring solutions 2022 and focuses on solutions for sanctions (name and transaction) screening and monitoring adverse media and its related elements
Basel Committee reviewing design of liquidity ratios
Focus on LCR and NSFR after Silicon Valley Bank and Credit Suisse, but assumptions may not change
Most read
- Too soon to say good riddance to banks’ public enemy number one
- Basel triggers new tussle on anti-Archegos rules
- Breaking out of the cells: banks’ long goodbye to spreadsheets