EU group: Aid still needed A group of European Union finance ministers have said that it is too early to withdraw state support for the bloc's banking system.
The ministers are due to discuss a plan that could end state guarantees for banks' debt starting June 2010, before much of this support is due to expire. EU countries are providing banks a range of aid, including recapitalization funds, programs to handle impaired assets and government guarantees for banks' debt issuance.
UK's FSA warns against ill-timed regulatory change The Financial Services Authority has warned that ill-timed reforms to the country's regulatory system could create new problems and risk losing lessons learnt over the past two years.
Britain's tripartite system of regulation – which splits responsibilities between the FSA, the Bank of England and the Treasury – is widely seen to have failed in the run-up to the credit crisis. The British government is due to propose legislation to turn the tripartite set-up into a council on financial stability.
FSA to shake-up regulatory fees structure The UK’s FSA has set out a number of proposals around simplifying the structure of fees that it levies on businesses and “enhance fairness and transparency.”
In its consultation paper, titled Regulatory Fees and Levies; Policy Proposals for 2010–2011, the regulator has proposed setting a standardized minimum fee that all firms will have to pay, which will cover the basic cost of being regulated, ensuring that variable fees, higher than the basic fee, increase in direct relation to a firm's size.
The regulator is also set to launch a fees calculator at the end of November 2009 to help firms translate what the proposals will mean for them.
UK tells EU: Slow down on finance-sector reforms The European Union's push into a regulatory overhaul is going too quickly and the current deadline of 2 December should be pushed back, a UK Treasury Committee has said.
The European Commission’s legislative proposals will create a European Systemic Risk Board to monitor threats to financial stability, along with three European supervisory authorities to better coordinate national regulations. But the Treasury Committee report says there are so many important changes needed the deadline should be extended.
UK reforms need to slow, bankers urge Some of the U.K.'s leading bankers have urged the Financial Services Authority to slow its efforts to overhaul markets, according to documents it sent to the regulator as part of a consulting process.
They demonstrate the level of discomfort the pace of change is causing an industry that has been nervous about publicly airing its dislike of reforms among widespread public anger over the financial sector's role in the recession.
In letters to the U.K. market regulator's chairman, Adair Turner, and its chief executive, Hector Sants, bank executives warned too little analysis had been conducted and raised concerns that proposals for change would stifle business by suffocating banks with too much regulation. They also expressed fears that opportunities for regulatory arbitrage would be rife if the U.K. pressed ahead with reform before securing international cooperation.
The letters were part of submissions made by several banks in feedback to the FSA's Turner review.
The FSA, which released a summary of the banks' views on its Web site at the end of September but not the letters themselves, declined to comment beyond its statement at the time that the majority of respondents have offered clear support for its main recommendations.
That statement read: "The strongest concern was the need for international consistency in formulation and implementation of the regulatory policy response to the crisis."
While most banks shared concerns that the FSA could act too fast, they differed in their positions on individual recommendations contained in the Turner review, including proposals on bank capital and liquidity regulations, the potential introduction of a cap on leverage and the monitoring of systemic risk.
The revelations of the banks' views come as the FSA today prepares to host its second conference on the Turner review in Westminster.
The FSA has to date issued codes on financial reporting and remuneration at banks, as well as last month finalizing rules on liquidity management. It issued a discussion paper on how to regulate banks that are "too big to fail". Banks have until February next year to respond, after which new rules are likely to be implemented.
EU regulator reprimands banks over disclosures In an analysis of the financial statements of 96 banks and insurers, including 22 from the FTSE Eurotop 100 index of leading blue chip firms, the Committee of European Securities Regulators has found that many of Europe's top banks and insurers left their shareholders in the dark over how they value assets hit by the credit crunch.
The results of CESR's analysis indicate that in some areas a significant proportion of European financial companies have failed to comply with mandatory disclosure requirements relating to financial instruments.
Global rule-setter IASB unveils latest accounting reform A second set of proposals have been published by the International Accounting Standards Board to replace its fair value rule that was criticized by policymakers for amplifying the credit crunch.
The latest draft looks at how banks and other companies book losses on financial instruments such as loans and corporate bonds. The change is likely to have a big impact when it takes effect.
The IASB's latest proposal will allow banks to take swift action on bad loans, a change policymakers hope will give them more time to make adequate provisions and lessen the need for the huge taxpayer-funded bailouts seen in the financial crisis.
"Therefore under the proposals, a provision against credit losses would be built up over the life of the financial asset. Extensive disclosure requirements would provide investors with an understanding of the loss estimates that an entity judges necessary," the IASB said.
Accountants said the challenges of switching to a more forward-looking method of booking losses should not be underestimated and must not confuse investors.
"In exploring the case for change, it will be important to consider not only the practicalities of implementation but also whether the advantages of an approach based on expected cash flows outweigh the disadvantages," said Nigel Sleigh-Johnson, head of financial reporting faculty at the Institute of Chartered Accountants (ICAEW) in England and Wales.
The IASB said it acknowledged the challenges and had therefore decided on a long consultation period, until end of June 2010. The change would not become mandatory until about 2013.
New accounting rule to ease pain for banks The International Accounting Standards Board has come up with a new rule on financial instruments. The rule change is the first of a three-stage process to replace the board's IAS 39 Fair Value rule.
The other two phases will not be completed until later in 2010 with the new rule mandatory from 2013. Banks and insurers are likely to be spared big asset writedowns in tough markets in future under the accounting rule change. The rules are, however, being seen as only a partial success. Moreover, European Union firms will not be able to apply the change straight away as the European Commission, whose approval is needed for use in the EU, will not consider endorsement until next year even though the bloc's finance ministers have called for speedy change.
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IFRS outlook – November 2009 The November issue of IFRS outlook, which provides timely information and insights related to IFRS and emerging issues, is now available.
This issue includes:
G-20 and the principles for sound compensation — accounting implications for share-based payment transactions In response to the calls to curb excessive executive compensation practices, the G-20 has issued the Principles for Sound Compensation Practice. In the first of a two-part series that analyses the potential accounting implications of the G-20 principles, we look at the effects on share-based payment arrangements. In our December issue, we will examine the effects of the G-20 compensation principles on cash compensation arrangements.
Fair value measurement – EYviews Following the publication of the IASB’s Exposure Draft on Fair Value Measurement that aims to provide a single source of guidance for all fair value measurement in IFRS, we look at views we expressed to the IASB, and areas of concerns highlighted.
Preparing for 2009 year-end reporting under IFRS The IASB has issued numerous new and amended standards and interpretations that have an effective date for financial years beginning 1 January 2009. Coupled with heightened interest from investors and regulators in the financial statements as a consequence of the recent economic events, we highlight the impact of these changes and the areas to focus on for companies preparing for their 31 December 2009 year end financial statements.
Financial reporting developments Find out how the Board’s tentative decisions could significantly impact your business – in particular, in the areas of financial instruments, consolidation, financial statement presentation and leases.
Resources Look here for an up-to-date list of our recent publications, including: the 2009 IFRS update which summarises the new and amended IFRS standards and interpretations applicable 1 January 2009, guidance on applying the fair value hierarchy disclosures, and IFRS for the solar industry which discusses the commonly occurring issues for the solar industry.
Supplements to IFRS outlook The latest supplements to IFRS outlook are now available.
Issue 59: Related party disclosures – Amendments to IAS 24 The IASB has issued a revised version of IAS 24 Related Party Disclosures that clarifies and simplifies the definition of a related party.
The revised standard also provides some relief for government-related entities (as defined in the amended standard) to disclose details of all transactions with other government-related entities (as well as with the government itself). In this supplement, we summarise the changes to IAS 24 and highlight the potential implications for businesses.
Issue 60: IASB publishes IFRS 9: Phase 1 of new standard to replace IAS 39 The IASB has just published phase 1 of IFRS 9 Financial Instruments, the accounting standard that will eventually replace IAS 39: Financial Instruments: Recognition and Measurement. Phase 1 of the project establishes a new classification and measurement framework for financial assets.
IAS 39 has been widely criticised as a standard that is complex and often difficult to apply. In April 2009, the G-20 Leaders, the Financial Stability Board, and various other stakeholders urged the IASB and the FASB to reduce the complexity of accounting standards for financial instruments and make significant progress towards a single set of high quality global accounting standards by the end of 2009. Whilst IFRS 9 is not mandatory until 1 January 2013, entities may adopt for reporting periods ending on or after 31 December 2009. In some jurisdictions, the local authority is required to endorse the new standard before it becomes available for adoption.
In this supplement to IFRS outlook, we highlight the main changes that come into effect with IFRS 9 and provide a brief commentary on how they could impact your business. We also summarise the Boards' initial proposals, constituent key concerns and the subsequent changes incorporated into the standard.
Talking SMEs We are pleased to present a new series called Talking SMEs. The IASB's aim in developing IFRS for SMEs for small and medium-sized entities was to create a standard that met the needs of entities that do not have public accountability. One in particular, was to lighten the onerous burden of reporting under full IFRS. At the same time, the standard offers an internationally recognised common reporting language for entities that meet the definition of an SME.
In this first issue, we look at some of the considerations and factors that entities should take into account if they wish to adopt the IFRS for SMEs standard. These include the definition of an SME, meeting the needs of users, tax accounting issues, legal and regulatory compliance, etc. Subsequent issues of Talking SMEs will look at specific accounting issues that arise from applying the standard.
Capital Markets news In this issue, we take a look at the following areas, which will have significant impact in the near future:
Preliminary views on revenue recognition in contracts with customers – the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) discussion paper on revenue recognition and two significant recent Emerging Issues Task Force (EITF) abstracts on revenue recognition under US GAAP. These changes will have particular significance for technology and telecommunications companies among others.
New rules regarding remuneration policies in the financial services sector and the remuneration of directors of listed companies.
The end of UK GAAP – the consultation by the UK’s Accounting Standards Board (ASB) on how the UK will adopt the standard on IFRS for small and medium entities.
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