ECOFIN will discuss IASB governance and 'credit crunch'

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05 Jul 2008

The European Union's Economic and Financial Affairs Council (ECOFIN) will meet in Brussels on 8 July 2008. Their agenda includes discussion about IASB governance, and also about accounting and disclosures by financial institutions.

Click for the Background Paper (PDF 166k). Here is are two excerpts:

International accounting standards – IASB Governance

The Council should adopt the conclusions on the reform currently taking place in the International Accounting Standards Board (IASB), following the public consultation launched at the end of May (11183/08). It has already considered the governance and financing of the IASB, and adopted conclusions on this subject in July 2006 and July 2007.

There are two reasons why conclusions must again be adopted this year:

  • the IASCF, the foundation responsible for appointing the members and the financing of the IASB, launched a process of constitutional review last May with a view to enhancing its own governance and that of the IASB; it proposes inter alia to set up a Monitoring Committee within the IASCF which would be responsible for ensuring that the public interest and prudential concerns are better taken into account when accounting standards are being drawn up;
  • recent financial turbulence has demonstrated the need for a reliable mechanism for drawing up international accounting standards.
Against this background, the Council aims to express a firm European position, focused in particular on the principles identified by the draft conclusions.

Financial markets – Implementation of current initiatives

The Council will review developments on current initiatives, in accordance with a 'road map' adopted at its meeting last October in order to deal more effectively with the turmoil on financial markets since August 2007. The Council should adopt conclusions on two issues in particular:

  • progress in the transparency of banks and other financial institutions regarding the valuation of their risk assets;
  • the line to be followed in Europe and at world level regarding rating agencies (11229/08).
The draft conclusions stress that prompt and full disclosure by financial institutions of their exposure to distressed assets and off-balance sheet vehicles and of their write-downs and losses is essential to bring back confidence in the markets.

The Committee of European Banking Supervisors recently drew up recommendations to give guidance to banks in evaluating their assets. According to the draft conclusions, this is a very important factor in ensuring greater consistency in the practices of financial institutions, which is essential for restoring confidence in the real situation of the market.

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