Ojo, Marianne (2011): Fair value accounting and procyclicality: mitigating regulatory and accounting policy differences through regulatory structure reforms and Enforced Self Regulation.
Download (571kB) | Preview
In what ways can changes to the structure of regulation (as well as other regulatory reforms) mitigate the effects of policies which trigger financial instability? More specifically policies, information asymmetries or externalities which could give rise to bank contagion, systemic/liquidity risks or procyclical effects?
Whilst acknowledging that accounting standards play a fundamental role in addressing problems which could contribute to information asymmetries and ultimately systemic risks, this paper also highlights why the type of regulatory structure, clear allocation of responsibilities between regulators, as well as measures aimed at fostering accountability, constitute vital elements which could serve as safeguards in mitigating procyclical effects (as well as other factors) which could trigger financial instability. In achieving this aim, the paper focusses on the rationale for fair value accounting, as well as problematic issues arising from its implementation.
The adoption of international accounting standards is considered to have a vital role in contributing to financial stability. This paper will also illustrate how the implementation of accounting standards and policies, in certain instances, have contrasted with Basel Committee initiatives aimed at mitigating procyclicality and facilitating forward looking provisioning. More importantly, the paper will highlight how and why differences between regulatory and accounting policies could (and should) be mitigated.
|Item Type:||MPRA Paper|
|Original Title:||Fair value accounting and procyclicality: mitigating regulatory and accounting policy differences through regulatory structure reforms and Enforced Self Regulation|
|Keywords:||stability; liquidity risks; systemic risks; pro cyclicality; fair values; information; certainty; regulation; central banks; accountability; macro prudential regulation|
|Subjects:||K - Law and Economics > K2 - Regulation and Business Law
E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty
M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles
G - Financial Economics > G0 - General > G01 - Financial Crises
|Depositing User:||Dr Marianne Ojo|
|Date Deposited:||09 Mar 2011 19:02|
|Last Modified:||21 Apr 2017 06:54|
Ayres I and Braithwaite J, Responsive Regulation: Transcending the Deregulation Debate Oxford University Press at page 102
Ball R, „International Financial Reporting Standards (IFRS): Pros and Cons for Investors“ <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=929561>
Basel Committee on Banking Supervision, „Basel III and Beyond“ and Remarks of Nout Wellink, Chairman, Basel Committee on Banking Supervision and President, De Nederlandsche Bank in relation to the conference High Level Meeting on Better Supervision and Better Banking in a Post-crisis Era, FSI and EMEAP Working Group on Banking Supervision (hosted by Bank Negara Malaysia) on the 17th January 2011 <http://www.bis.org/speeches/sp110118.pdf>
European Commission, „Commission Adopts Legislative Proposals to Strengthen Financial Supervision in Europe“ <http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/1347>.
European Commission, „Financial Supervision: Additional Legislative Proposals (January 2011) <http://ec.europa.eu/internal_market/finances/committees/index_en.htm>
Federation des Experts Comptables Europeens, FEE's statement „Future Approach to Setting Global Financial Reporting Standards: A New Approach to Setting Global Financial Reporting Standards“ at page 2 <http://www.iasplus.com/europe/0907feepolicy.pdf>
Grande M, Accounting and Procyclicality, Conference on Financial Reporting in a Changing World at page 2
Khan U, „Does Fair Value Accounting Contribute to Systemic Risks in the Banking Industry?“ <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1327596>
Laeven L and Majnoni G, „Loan Loss Provisioning and Economic Slowdowns: Too Much, Too Late? (2003) Journal of Financial Intermediation 12(2) 178-197
Lastra RM and Garicano L, „ Towards a New Archictecture for Financial Stability: Seven Principles“ Journal of International Economic Law 13(3)(2010) at pp 597-621
Laux C and Leuz C, „Did Fair Value Accounting Contribute to the Financial Crisis?“ ECGI Working Paper Series in Finance, Working Paper No 266 October 2009 <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1487905>
Prat A, „The Wrong Kind of Transparency“ LSE STICERD Research Paper No. TE439 October 2002 <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1160984>
Moreno R, „Policymaking from a Macro prudential Perspective“ BIS Working Paper No 336, January 2011
Ojo M, „The Financial Services Authority: A Model of Improved Accountability?“ Global Journal of Business Research, Vol. 1, No. 1, p. 83-96, 2007
Ojo M, „ Central Bank's Role and Involvement in Bank Regulation: Lender of Last Resort Arrangements and the Special Resolution Regime (SRR) http://mpra.ub.uni-muenchen.de/15771/ and http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1420812
Ojo M, „The Role of the IASB and Auditing Standards in the Aftermath of the 2008/2009 Financial Crisis“ European Law Journal, Vol. 16, No. 5, September 2010, pp. 604–623
Ojo M, „Cooperative and Competitive Enforced Self Regulation: The Role of Governments, Private Actors and Banks in Corporate Responsibility“ <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1616235> and http://mpra.ub.uni-muenchen.de/22918/1/MPRA_paper_22918.pdf
Speech at The Lord Mayor’s Dinner for Bankers & Merchants of the City of London by The Chancellor of the Exchequer, The Rt Hon George Osborne MP, at Mansion House <http://www.hm-treasury.gov.uk/press_12_10.htm>
Weber RH, „Mapping and Structuring International Financial Regulation – A Theoretical Approach“ 20 (5) European Banking Law Review (2009)
Weber RH, „Multilayered Governance in International Financial Regulation and Supervision“ Journal of International Economic Law 13(3) (2010) 683-704