BIS study on accounting and prudential regulation
19 Sep 2005
The Bank for International Settlements has published a working paper on Accounting, Prudential Regulation and Financial Stability: Elements of a Synthesis (PDF 263k).
We examine the reasons for these differences and propose ways in which they could be reconciled. We propose a strategy based on two principles: first, in the long term, the 'decoupling' of the objective of accurate financial reporting about the firm from that of instilling the desired degree of prudence in its behaviour; and second, a 'parallel' process towards that objective so that at all points the prudential authorities can neutralise any undesirable implications for financial stability of changes in financial reporting standards. We stress that close cooperation between accounting standard setters and supervisory authorities is called for both in developing the final set of information and in implementing it. |