Watchdogs push for accounting rules review

The news comes in the wake of the collapse of US investment bank Bear Stearns, brought down by the sub-prime crisis.

The Financial Stability Forum’s Senior Supervisor’s Group reviewed 11 of the largest banking and securities institutions. It said some companies failed to properly price the risk of exposures to off-balance sheet vehicles, at precisely the time that it became difficult or expensive to raise funds to deal with the issue.

‘Several firms challenged by market events acknowledged the need to improve their
integration of credit and market risk management with accounting and financial control functions,’ last week’s report said.

A re-think on off-balance sheet reporting rules has now been suggested, with a view to discussing the appropriate treatments of exposures to off-balance sheet vehicles.

Bear Stearns’ auditor, Deloitte, warned that there were problems with the bank’s fair value accounting in an audit released last year, particularly in the values of two of Bear Stearns’ hedge funds.

Read the report at fsforum.org (SIC)