Watchdogs push for accounting rules review
Regulatory watchdogs, including the Financial Services Authority and the US Federal Reserve, are proposing a review of accounting rules following the credit crunch
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)