No accounting for leverage
The Basel Committee is set to unveil proposals for a leverage ratio in December as a means of constraining the excessive growth of bank balance sheets. But risk managers warn the proposals risk creating an unlevel playing field between US and European banks due to differences in the accounting treatment. Joel Clark reports
The precarious relationship between regulators and accountants has been brought sharply into focus this year, as regulatory bodies have thrashed out major changes to bank supervision in response to the financial crisis. The reform proposals have conflicted with accounting standards in a number of areas, and standard setters have been driven to make major changes to their rules - from new models for loan-loss provisioning to fair-value accounting and the treatment of off-balance-sheet instruments
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