RegulationAccounting StandardsBanks lobby Turner review over mark-to-market accounting rules

Banks lobby Turner review over mark-to-market accounting rules

Banks warn that mark-to-market accounting rules have exacerbated the economic downturn, as FSA chairman prepares to publish his report on reforming financial regulations

The Turner report on reforming financial regulations, due to be published on
Wednesday, has heard complaints from banks that accounting rules have worsened
the economic crisis, the Financial Times reported.

Banks have complained that accounting rules have prevented them from making
provisions for future losses by forcing them to mark assets to market prices
when they have no intention of selling, the newspaper said.

Accountants fear that if clumsy changes were introduced to the way banks
account for any provisions they could leave managers with too much latitude and
risk some choosing to ‘smooth’ earnings to cover poor performance, the FT said.

The FSA could only recommend a change to accounting rules, although
accountants told the FT that Lord Turner ‘gets’ their concerns.

The FT also said that the prime minister, Gordon Brown, believes Wednesday’s
report from Lord Turner, chairman of the FSA, will also provide valuable
ammunition in Britain’s drive for global regulatory reforms at next month’s G20
summit.

Further reading:

Brown
will use report to resist FSA split

Goldman
boss defends fair value accounting

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