November 30, 2015 / 1:10 PM / 2 years ago

Accounting body sees EU approval for bank loans provisioning rule soon

* Insurers could be initially exempt from provisioning rule

* IASB leery on new rules for small companies in EU

By Huw Jones

LONDON, Nov 30 (Reuters) - The European Union will approve a delayed accounting rule that forces banks to book losses on loans much earlier and apply a core lesson from the financial crisis, a senior accounting official said on Monday.

The “IFRS9” rule has been written by the International Accounting Standards Board (IASB) and the EU must give its endorsement for it to become mandatory across the 28-country bloc.

Under current rules, banks make provisions near or at the point of default.

The new rule will require banks to set aside some money on the loan’s first day from 2018, five years after the original start date and a decade after the crash of Lehman Brothers bank.

Insurers also come under the net as they hold financial instruments on their books.

“I expect that at least for the banking sector, there will be a very clear yes very shortly,” IASB Chairman Hans Hoogervorst told an ICAEW accounting conference.

Insurers could be initially exempted until a separate accounting rule for contracts is agreed, he added.

The rule took several years to approve by the IASB as protracted attempts to have a single global rule finally ended when the United States decided to have its own version. The EU has not rushed to endorse the new rule either as it reviewed the usefulness of IASB standards in general.

Hoogervorst is nearing the end of his first five-year term as IASB chairman and said a core aim has been to become a “listening organisation” rather than an ivory tower many perceived it to be in the past.

“If they want to have me, I am available,” the former Dutch finance minister and securities regulator said on prospects of a second term.

His “great joy” has been the lack of backlash after the United States slammed the brakes on adopting IASB rules. There were fears this would discourage other countries like Japan from moving closer to IASB but this did not happen.

He does not expect the United States to change its mind anytime soon.

“We just have to be patient. If the U.S. is the only big country out, then who knows what happens,” he said.

After an intensive few years of rulemaking, he said the IASB would now focus on “cleaning up” existing rules rather than embarking on a new series of major standards.

The EU has suggested tailor-made accounting rules for firms wanting to list on SME Growth Markets but Hoogervorst poured cold water on this.

“I don’t seen an immediate solution,” he said, adding that changing disclosure requirements could be the answer. (Reporting by Huw Jones; editing by Susan Thomas)

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