Bankers throughout Europe are waiting to see what Sir David Tweedie, head of the International Accounting Standards Board, will do with the now much-fought-over standard IAS39. The whole episode is beginning to turn into something of a nail-biter.
Firstly, interest groups across the continent, including the British Bankers Association, are furiously trying to negotiate concessions. Secondly, they have more time because the IASB will not make the self-imposed 31 March deadline for publishing final versions.
Among bankers, therefore, the sense of anticipation has been heightened and observers have detected the faintest glimmer of hope for some sort of reprieve.
IAS39 will make banks account for financial assets at current or fair values, not historic cost. A boon for investors trying to understand a bank’s financial results, but a bit of an albatross for bank executives who realise the bottom line could end up looking a lot more volatile.
One hope is that somehow UK banks will negotiate some sort of opt out from the international rules. Is that realistic? Not in the least – the European Central Bank has already cast aspersions on the standard and French president Jacques Chirac has publically castigated the standard setter for the damage it may do to banks and, from that, the risks it may pose to European economies. After all, banks with volatile accounts might appear as poor bets in the investment stakes.
The point is, if UK banks were near to achieving an opt out, France and Germany would issue their own demands. Under such pressure, the international accounting system could turn into a house of cards ready to come crashing down. With that as a realistic prospect, it is unlikely anyone will grant an opt out for the UK.