Global authorities to review bank capital standards in wake of accounting rule's 'procyclicality' flaws

25 October 2018 7:33am
Global authorities plan to look into adjusting banks’ capital requirements in light of a new international accounting standard that falls short of taming economic boom and bust swings, a Bank for International Settlements official said.

Claudio Borio, monetary and economic chief of the world’s central banks group, said “the real issue is how to calibrate and structure” capital standards and possibly dividend restrictions to offset the shortcomings of IFRS 9.

“While the new [accounting] standard is likely to mitigate the procyclicality of the financial system to some extent relative to the previous, incurred loss model, it falls short by a significant margin of what one would like from a financial stability perspective,” he said in a Madrid speech* posted Wednesday.