Реферат: Accounting rules for regulations in banking sector

a) basic indicator approach;

b) standardized approach.

c) internal measurement approach.

The first pillar is generally accepted all over the world and almost every commercial bank must keep its capital of 8% of risk-weighted assets.

That requirement is very important for bank’s management, because when they have very poor (of low quality) credit (and other assets) portfolio, they must either raise the capital or release that asset. Otherwise, they may face very serious consequences, including license withdrawal.

But new Accord allows banks to establish their own systems of calculating probability of creditors collapse. According to this banks may implement external or even internal ratings into their clients evaluations. If they do this, they may create new, much more flexible, systems of calculating provisions for likely bad debts.

The second pillar «Supervisory review process», considers how national supervisory bodies should ensure that each bank implement Basel recommendations. As the new Accord stresses the importance of bank’s own systems for calculating capital adequacy, the role of supervisors has dramatically changed. Instead of being standards setters, they must only evaluate and consult appropriateness of these systems.

The last, the third pillar concentrates on market discipline as a power, which push banks into clear and fair disclosure of all risks. This is the power of market that should make banks interested in publishing more information covering banks’ risk profiles and capital adequacy.

As we can see, the Basel Committee propositions, which in fact are not obligatory to any single bank, have a huge influence on their activity, because many national supervisors state them as a bench-mark.

And now let’s consider the International Accounting Standards Board’s principles.

The international Accounting Standards Board (IASB), previously the International Accounting Standard Committee (IASC) an independent standard setting body. It issues the International Financial Reporting Standards (IFRS), previously the International Accounting Standards (IAS) covers main problematic areas and advises how entities should disclose, measure and present different accounting positions. Among them (are four standards deeply connected with banking activity:

1. IFRS 30 – Disclosures in the Financial Statements of Banks and Similar Financial Institutions [12].

2. IFRS 32 – Financial Instruments: Disclosure and Presentation [13.]

3. IFRS 39 – Financial Instruments: Recognition and Measurement [14].

4. IFRS 37 – Provisions, Contingent Liabilities and Contingent Assets [15].

The international Financial Reporting Standard 30 – Disclosures in the Financial Statements of Banks and Similar Financial Institutions, should be applied in the financial statements of all banks (and other institutions which are allowed to credit and receive deposits. This standard describes what kind of information has to be included in banks’ financial statements. These are:

1) in the income statement:

a) interest and similar income;

b) interest expense and similar charges;

c) dividend income;

d) fee and commission income;

e) fee and commission expense;

f) gains less losses arising from dealing securities;

g) gains less losses arising from investment securities;

h) gains less losses arising from dealing in foreign currencies;

i) other operating income;

j) losses on loans and advance;

k) general administrative expenses;

l) other operating expenses;