Saturday, April 4, 2009

EU Ministers Say Accounting Convergence With U.S. Is ‘Critical’

On Bloomberg by Lorenzo Totaro and Rainer Buergin:

European Union ministers said it is “critical” that convergence on accounting standards is reached on the continent to ensure that the region’s banks are not placed at a disadvantage against U.S. competitors.

The International Accounting Standards Board, which writes the rules used in Europe, must cooperate with the U.S. Financial Accounting Standards Board, the ministers said in a statement today following a meeting of European finance ministers and central bankers in Prague. A goal is to avoid “competitive distortions,” they said.

European lenders may face a disadvantage without changes to mark-to-market rules similar to those decided by the U.S. on April 2. The U.S. move stands to help banks such as Citigroup Inc. report higher profits by easing requirements to recognize fluctuations in the value of investments. Critics of the fair- value rule say it hurts banks by forcing them to book paper losses in the midst of the crisis.

“If it was up to me to decide, I would just download the U.S. text with Google and adopt it with a European blessing,” Italy’s Finance Minister Giulio Tremonti told reporters after the meeting. German Finance Minister Peer Steinbrueck said he wants similar accounting principles in Europe as in the U.S.

Investors’ Sentiment

European countries are under more pressure to achieve concrete progress on regulation. Ministers noted today “the critical importance of converging accounting standards at a global level” as well as “ensuring adequate transparency of banks’ financial situation is key to restoring confidence in financial markets.”

“The U.S. has already taken the lead on accounting standards, with the recent FASB decisions on mark-to-market which lifted investors’ sentiment,” Marco Annunziata, chief economist of UniCredit Group said in an interview today. “If the EU wants to play a guiding role on the issues it claims are most important, it will need to accelerate its decision process.”

“We need to arrive at a level playing field on this matter,” French Finance Minister Christine Lagarde told reporters in Prague today. “We need to stress to the IASB the urgency to examine accounting principles, in particular those concerning the valuation of illiquid assets.”

No comments: