Int’l Banking, Accounting Rulemakers to Cooperate on Standards

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By David R. Jones

Two international banking and accounting organizations are set to work more closely in developing standards for global finance.

The Switzerland-based Basel Committee on Banking Supervision (BCBS)—the primary global standard setter for the prudential regulation of banks—and the group that oversees development of international financial reporting standards, the IFRS Foundation, said Sept. 5 that they have signed a memorandum of understanding designed to strengthen their cooperation.

Cooperation between BCBS and IASB is important, the MOU said, because financial information prepared under IFRS forms the basis for calculating regulatory capital and other regulatory measures. In addition, disclosures prepared under IFRS encourage stability and discipline in financial markets, the agreement said.

Mutual Influence

BCBS and the foundation will be in stronger positions to influence each other’s work, both of which affect global financial markets.

Under the MOU, BCBS will increase its collaboration with the foundation and its accounting standard setter, the International Accounting Standards Board (IASB), in sharing information and offering feedback on each other’s activities.

The two organizations’ expanded partnership, according to the MOU, could include:

  •   identifying IFRS implementation concerns and signs of differing practice among jurisdictions in applying IFRS;
  •   BCBS submitting requests to IASB’s IFRS Interpretations Committee to resolve differing applications of IFRS; and
  •   each organization inviting representatives of the other to participate in consultative groups.
The MOU better positions BCBS and IASB to boost their teamwork when IFRS 9: Financial Instruments take effect Jan. 1, 2018, though the new standard’s impact on BCBS standard setting remains unclear.

IFRS 9 will require banks to change loan valuations when credit quality deteriorates by establishing provisions for their expected losses—not just losses tied to defaults, deputy governor of the Bank of Italy Fabio Panetta said in a June 14, 2017 speech posted on BCBS’s web site.

“The new standard will force banks to improve the allocation and assessment of loans and to adopt new criteria to measure credit risk,” he said.

To contact the reporter on this story: David R. Jones in London at correspondents@bna.com

To contact the editor responsible for this story: S. Ali Sartipzadeh at asartipzadeh@bna.com

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