IASC News: Basel Committee supports IAS in report to G7

The Basel Committee on Banking Supervision, an international organization of bank regulators, recently expressed its support for the International Accounting Standards Committee’s (IASC) set of core accounting standards, based on its own comprehensive review.

“The committee strongly supports efforts to harmonize accounting practice internationally,” said William J. McDonough, chair of the Basel Committee and president and CEO of the Federal Reserve Bank of New York. “The growing interdependence of international financial and banking markets necessitates transparent and comparable published financial statements. We support the standards developed by the IASC and plan to continue a close dialogue with the IASC and the banking industry to monitor future developments in this important area.”

The Basel Committee undertook the review at the request of the G7 Finance Ministers and Central Bank Governors, which in October 1998 announced their support of IASC standards as a means of “greater transparency and openness in the financial operations of individual countries, financial and corporate institutions, and international financial institutions.”

At that time, the G7 group called upon IASC to “finalize by early 1999 a proposal for a full range of internationally agreed-upon accounting standards. IOSCO (International Organization of Securities Commissions), IAIS(International Association of Insurance Supervisors), and the Basel Committee should complete a timely review of these standards.”

In its report, the Basel Committee commented specifically on IAS 30, Disclosures in the Financial Statements of Banks and Similar Financial Institutions, and IAS 39, Financial Instruments. The Basel Committee identified several areas in which IAS 30 could be updated to better reflect recent evolution in banking practices. The report noted that representatives of IASC, the Basel Committee, and the banking industry have been meeting to discuss the complex issues associated with applying IAS 39 to banks. In releasing its report, the Basel Committee said that its “dialogue with the IASC on IAS 39 resulted in positive steps in the area of implementation guidance.”

The Basel Committee’s review focused on 15 IASC standards affecting the banking industry. The report covers those standards and also explains the criteria by which the Basel Committee judged them, including relevance, reliability, consistency of resulting information, prudence, theoretical soundness, practicability, precision, restriction of alternative treatments, comprehensiveness of disclosures, and suitability for implementation in both advanced financial markets and emerging markets.

The text of the Basel Committee’s report and accompanying press release are available online at www.iasc.org.uk.

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