Euro bankers want no expansion of fair value in new bank rules

European Central bankers warned against any expansion of fair value in new
proposals aimed at forcing banks to plan for bad loans,
news agency reports

The International Accounting Standards Board (IASB) last year proposed new
rules which would force banks to provision across all loans, good or bad, for
those that turn bad.

While there is broad consensus between European central bankers and the IASB
on the need for banks to plan for bad loans, there remains differences in
approach. Central bankers prefer a “through the cycle” approach consistent with
their responsibility to maintain stable markets.

The IASB has proposed an expected loss model, which aims to provide more

The IASB said it is not planning to expand its use of fair value, which
forces assets to be valued at market prices, in its proposed banking model.
Despite this, central banks are warning against the expansion of fair value,
which has been blamed for exaggerating the effects of the credit crisis last

European Central Bank President, Jean-Claude Trichet told Reuters: “It is
essential that accounting standards setters and supervisors develop a truly
robust provisioning approach based on expected losses,” the group, chaired by
European Central Bank President, Jean-Claude Trichet, said in a statement.

Read the full story:
bankers turn up heat on accounting reform

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