Thursday, October 13, 2011

Accounting chief stands by Greek debt intervention


By Huw JonesLONDON, Oct 13 (Reuters) - A global accounting standard setter said on Thursday he would intervene again if banks wrongly apply rules to avoid proper writedowns on Greek sovereign debt and other assets.International Accounting Standards Board (IASB) chairman Hans Hoogervorst said on Thursday the financial crisis was caused by too many people looking the other way when applying rules and regulators being “bossed around by banks”.”I am going to stand up for this organisation and stand up for our standards,” Hoogervorst told the board’s trustees at a webcast meeting in Paris.Hoogervorst had written to the European Securities and Markets Authority (ESMA) saying banks in the European Union should have booked bigger losses on Greek government bond holdings in their second-quarter results.Some banks had 50 percent writedowns in line with market discounts but others, particularly in France, opted for 21 percent, saying there was no proper liquid market reference.Yves-Thibault de Silguy, a French trustee, said he was surprised to learn about the letter after it was leaked and called on Hoogervorst to explain himself.De Silguy said ESMA and the European Banking Authority had failed to reach consensus on Greek debt writedown levels and the letter might be interpreted as taking sides.There was a need to ensure total independence of institutions and for a more formalised process to deal with such situations in future, de Silguy said.Hoogervorst was broadly backed by the trustees who agreed to a more formal internal consultation process on public positions in future, but several cautioned against a bureaucratic system.Inconsistent application of rules sent out a wrong message to the world, Hoogervorst said.”A lot of people in the outside world are not friendly to IFRS (international accounting standards) and say ‘yes, you have all these countries applying IFRS but the truth is they are all doing it in different ways so what is the worth of this global standard’,” Hoogervorst said.The United States is due shortly to say whether it will make IASB rules mandatory but U.S. critics say there are inconsistencies in how they are applied in over 100 countries.Hoogervorst said enforcement of rules — mandatory for listed companies in the 27-nation EU — was a matter for regulators and not the IASB.There was consultation with a few board members that took “some of the sharp edges” off the letter but a more formal process could be introduced in future, he said. “Still, I feel good about what we did and the ultimate outcome of this. By the end of this year we will have consistent application in Europe,”the former Dutch finance minister and securities regulator said.With the third-quarter earnings season having started in Europe, Greek bonds are trading at a discount of about 60 percent, bigger than at the end of the last period.Accounting industry officials said last month that even banks that had 50 percent writedowns last time would find it hard to argue against further hits.ESMA and the IASB are now looking past third quarter statements to annual results which have to be fully signed off by auditors who are pushing for realistic writedowns.One trustee told the meeting that “regulators knew exactly in my mind what they were doing” when it came to inconsistent application of IASB rules.

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