This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

UK adjustments to IFRSs for regulatory capital

  • United Kingdom Image

31 Oct 2004

The UK Financial Services Authority has published a consultation paper proposing four adjustments to capital as measured under IFRSs for the purpose of measuring "prudential regulatory capital" in the financial services industry.

FSA Press Release (PDF 54k, contains link to consultation paper and a related newsletter):
  • In the treatment of cash-flow hedges, we propose to eliminate from the measurement of regulatory capital all fair value gains and losses arising from the fair valuation of derivatives that have been accumulated in equity;
  • In the treatment of available-for-sale assets we propose to follow the US approach and to leave equities at fair value, but write available-for-sale debt instruments back to cost or amortised cost;
  • For fair value options we propose that unrealised gains or losses arising from the fair valuation of a firm's own credit risk should be eliminated from regulatory capital; and
  • In accounting for defined benefit pension schemes we propose that the accounting measure of actuarial losses should be eliminated for regulatory purposes. It should be replaced by the company's best estimate of the level of additional funding that it will need to provide for its pension scheme over the next five years.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.