Wednesday, November 11, 2009

Morning Yuk

Brussels warning on fair value shake-up

By Rachel Sanderson in London and Nikki Tait in Brussels
Published: November 11 2009 00:05 | Last updated: November 11 2009 00:05

Brussels has warned that a radical overhaul of rules on how banks value their assets could lead to greater volatility in their accounts, undermining broader financial stability.......
The IASB reforms will allow more flexibility in determining which bank assets must be marked to market and which can be valued according to so-called amortised cost accounting, which smooths out market volatility.
But Commission officials believe the overhaul does not go far enough to limit the use of fair value accounting. Analysts say some European banks with large investment banking activities would be hit disproportionately.
In the letter to the IASB, J├Ârgen Holmquist, director general of Internal Markets at the European Commission, said more assets might be marked to market under the new system than even under existing rules. He urged the IASB “urgently” to consider further changes.

Italics are mine.

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