Commissioner McCreevy urges easing accounting rules for banks

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10 Oct 2008

In remarks before a plenary session of the European Parliament in Brussels on 8 October 2008, Charlie McCreevy, the European Commissioner for Internal Market and Services, urged the IASB to ease accounting rules for banks under IFRSs.

He said that banks should be allowed to transfer assets out of fair value through profit or loss ('trading book') into an amortised-cost-with-impairment model ('banking book') on the same basis as US GAAP allows. Under the US GAAP model, such transfers are 'rare', and the fair value at date of transfer becomes the 'deemed cost' going forward. Several news reports have suggested that Mr McCreevy proposed that the transfers should result in a bank retrospectively restating the investments back to their original historical cost at acquisition, with a corresponding increase in the bank's capital. But this is not indicated in Mr McCreevy's Prepared Remarks (PDF 72k). Here is an excerpt:

In addition we are urgently putting changes to our accounting rules to ensure Banks in the EU can avail of the same flexibility that is offered to banks in the US. Namely this will provide the option for individual banks if they want to move assets from their trading books to their banking books. This is a comitology measure which I hope the Parliament will be able to give its agreement as a matter of urgency. In the meantime I would hope that national supervisors would apply these new provisions already so that banks, who wished to, could avail of this new possibility for their third quarter results. In addition there is the IASB's acceptance of the US SEC's clarification of the use of fair value accounting when there is no active market information. This is also highly relevant for banks and should be used for third quarter reporting.

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