EU's Barnier says won't budge on accounting rule

LONDON Wed Jul 13, 2011 4:25pm EDT

European Internal Market Commissioner Michel Barnier speaks during a news conference at the destroyed national place in Port-au-Prince July 28, 2010. REUTERS/ St-Felix Evens

European Internal Market Commissioner Michel Barnier speaks during a news conference at the destroyed national place in Port-au-Prince July 28, 2010.

Credit: Reuters/ St-Felix Evens

LONDON (Reuters) - The European Union won't give the green light yet to a new accounting rule that could ease fallout from the euro zone's sovereign debt crisis on banks, a top EU official said on Wednesday.

"I do not believe this will be the first solution to the problems we face in Europe at the moment," EU Internal Market Commissioner Michel Barnier told a webcast meeting in New York.

The International Accounting Standards Board (IASB), under pressure from policymakers at the height of the financial crisis, has eased its "fair value" or mark-to-market rule that was known as IAS 39.

The first completed part of the new IFRS 9 standard allows banks to price some government debt held on their books at cost rather than at current depressed prices.

This avoids the "cliff effect" of many banks needing to recognize large losses and top up regulatory capital buffers.

IASB Chairman Hans Hoogervorst, speaking at a joint meeting of the IASB's trustees and monitoring board of public officials that includes Barnier, urged the EU to begin implementing IFRS 9.

This would allow European banks could exclude some of the broader markets effects as the "financial crisis has come back with a vengeance," Hoogervorst said.

Moody's cut its rating on Irish sovereign debt to junk on Tuesday while a Fitch downgrade sent Greek bonds further into junk territory on Wednesday as the EU scrambled to find a solution to the euro zone's debt crisis which is threatening to engulf Italy as well.

The European Commission must approve any IASB rule change to become applicable for listed companies in the EU.

"Under IFRS 9 impairments will still be painful but I am convinced it would be more timely done because the cliff effect is much less severe," Hoogervorst said.

But Barnier reiterated the Commission's view that it wants to see how two other elements of IFRS 9 will be finalized before making up his mind on the complete rule.

"There is no change in our position," Barnier said.

U.S. UNDER PRESSURE

IASB rules are used in over 100 countries but not the United States which uses its own accounting standards.

Leaders of the world's top 20 economies, including the United States, want a single set of global rules by "converging" IASB and U.S. rules by the end of this year.

The Securities and Exchange Commission (SEC) is due to say this year whether it will then adopt the reformed IASB rules outright from some point in the future.

SEC Chairman Mary Schapiro, also on the IASB's monitoring board, came under pressure to make an announcement sooner rather than later.

"We need a firm decision by the SEC itself," Barnier said.

The United States has been given a seat on the monitoring board and on the IASB itself in the hope it would adopt its rules eventually.

The monitoring board's remit and role is being reviewed and there is a push to make all its members formally commit to using IASB rules as a condition of membership, piling more pressure on the United States.

"It was understood that a certain level of commitment would probably be required," said monitoring board acting chairman Masamichi Kono of the Japan Financial Services Agency.

Schapiro made no comment at the meeting.

(Reporting by Huw Jones; Editing by Tim Dobbyn)

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