* New impairment rule in 2017, nine years after crisis
* Hopes of single global impairment rule all but ended
* Banks say new rule to mark a profound change
* IASB says converged global rules "difficult"
By Huw Jones
LONDON, Dec 3 An accounting rule forcing banks
to set aside capital far earlier for troubled loans will be
completed next month and start in 2017, a global standard setter
said on Tuesday.
Leaders of 20 major economies (G20) called for the new rule
in 2008 at the height of the financial crisis when taxpayers had
to bail out undercapitalised banks.
Banks currently set aside capital when a loan effectively
defaults, seen as too late, and the new rule would force lenders
to set aside at least some capital upfront before any impairment
The G20 wanted a single global rule for investors to compare
the health of top lenders but this is now unlikely despite five
years of trying by two key standard setters.
The Financial Accounting Standards Board (FASB), which sets
rules in the United States, and the International Accounting
Standards Board (IASB), which writes standards in over 100
countries, including Europe, are finalising two different rules
to the disappointment of the G20.
"I think we will finish deliberations in January. We are
practically done and we don't have any more major decisions to
make," IASB Chairman Hans Hoogervorst told Reuters.
"That means it should be ready for an effective date of the
first of January 2017," Hoogervorst said on the sidelines of a
conference organised by the ICAEW, an accounting body.
FASB is reconsidering its own draft version, with the IASB
model as one possibility but the "most likely scenario" for
achieving a single rule would be for the U.S. standard setter to
adopt the IASB model, Hoogervorst said.
Few believe this will happen given big differences and
mounting regulatory pressure for an agreement now that five
years have passed since the G20 call was made, with another four
years to go before the IASB rule will take effect.
FASB wants banks to make provisions for full lifetime losses
from the first day of the loan, while the IASB has opted for a
staged approach with only some provisioning at the start.
Richard Thorpe, senior accounting and auditing advisor to
the G20's regulatory task force, the Financial Stability Board,
said he would much rather have a single global rule.
"We haven't managed to get the same accounting after five
years of trying and that really is a shame," Thorpe said.
With two rules it would be harder for investors to compare
banks and they also left too much to judgement, making it harder
to apply them consistently, Thorpe said.
"There will be a big change in the size of provisions. How
early can banks provide information in the accounts on the
effects of the standard?" Thorpe added.
Banks are anxious for a final agreement as the new rule will
require major preparatory work.
"This is going to be quite a profound change," David
Bradbery, European head of technical accounting group at
Barclays bank, told the conference.
"We are starting to see interest from investors and analysts
even at this early stage into what might be the impact of these
proposals, and that is only going to increase as we get closer
to adoption," Bradbery said.
"First reporting is not necessarily going to be clearly
understood by everyone. We are looking to the publication of the
standards as the start of a comprehensive understanding
process," Bradbery added.
The G20 wants the two standard setters to say by year-end
how they will "converge" all their rules, a deadline that has
been repeatedly put back as the United States has yet to commit
to adopting globally written rules.
"I think there is a recognition in the Financial Stability
Board that it's going to be very difficult to come together,"