Реферат: Accounting rules for regulations in banking sector

a) cash and balances with the central bank;

b) treasure bills and other bills eligible for rediscounting with the central bank;

c) government and other securities held for dealing purposes;

d) placements with, and loans and advances, other banks;

e) other money market placements;

f) loans and advances to customers;

g) investment securities;

3) in the balance sheet (liabilities):

a) deposits from other banks;

b) other money market deposits;

c) amounts owed to other depositors;

d) certificates of deposits;

e) promissory notes and other liabilities evidenced by paper;

f) other borrowed funds.

According to that standard every bank institutions should also disclose an analysis of its assets and liabilities, based on the remaining period at the balance sheet date to the contractual maturity day (e. g. up to 1 month, from 1 month to 3 months, from 3 months to 1 year, from 1 year to 5 years and over 5 years). Other obligatory notes to the financial statements refers to concentration of assets and liabilities, off balance sheet items, sources of banking risks and related party transactions.

The international Financial Reporting Standards 32 and 39 seemed to be the most difficult standards for applying. They treat of disclosure, presentation, recognition and measurement of financial instruments – an area which is not the easiest to understand. Although these standards refer to every entity collecting financial instruments, the banks and other financial institutions are the most interested groups among them. They define financial assets as any assets that is cash, a contractual right to receive cash or another assets from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, an equity instrument of another enterprise. And the financial liabilities are contractual obligations to deliver cash or another financial assets to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. The standards classify financial instruments into 4 four groups:

1) loans and receivables originated by the enterprise;

2) held-to-maturity investments;

3) financial assets held for trading;

4) available-for-sole financial assets.

Initially measurement should be at cost and subsequent measuring at fair value (except for loans originated by the enterprise, held-to-maturity and assets without quoted market, which have to be valued at amortized cost).

The international Financial Reporting Standard 37 – Provisions, Contingent Liabilities and Contingent Assets states what kind of situations entitle banks (and other entities too) to recognize provisions. Generally, provisions are sub-class of liabilities and should not be disclose separately. They should be estimated on a prudent basis. Any provision is allowed if (and only if) the liabilities connected with provisions exist in the face of balance sheet.

It is necessary to tell a few words about the polish commercial banks’ situation in international environment.

As Polish banks, in many cases, belong to foreign capital groups (including international or even global banking institutions), they are generally well prepared to implementing international regulations. For example, if Polish bank belongs to any institution that presents its financial report in accordance with the IFRS, it ought to apply these rules, apart from local accounting requirements. As far as Basel Committee Accord is concerned, banks are trying to introduce the best system for estimating different kinds of risk (credit, operational and market). The banks’ staffs realize that earlier or later, the same regulations will be obligatory in Poland too. The easier situation his in those banks, which have foreign branch investor. They have unlimited source of global know-how.

The banks that are quoted on Warsaw Stock Exchange, must also be prepared for implementing new corporate governance to be in accordance with Polish Security and Exchange Commission’s law. An appropriate corporate governance policy and investor relationship will make reports readers more familiar with what they read.

As one can see, every bank and credit institution should apply different law regulations set by international bodies. Some of them are included into the law system, in a fact, but some of them must be applied by banks themselves, because it makes their activity and financial statements clearer to the investors. Otherwise, they will look like entities that have something to hide, which is not favourable to modern commercial institutions.

References

1. First Council Directive 77/780/EEC of 12 December 1977 on the coordination of the law, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions, Official journal No. L 322, 17/12/1977 P. 0030–0037.

2. Second Council Directive 89/646/EEC of 15 December 1989 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions and amending Directive 77/780/EEC, Official journal No. L. 386, 30/12/1989 P. 0001–0013.