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The economic consequences of extending the use of fair value accounting in regulatory capital calculations: A discussion

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  • Laux, Christian

Abstract

When the Federal Reserve, following Basel III, proposed removing the accumulated other comprehensive income (AOCI) filter that shields regulatory capital from unrealized gains and losses on available-for-sale (AFS) debt securities, it triggered fierce opposition. The topic is at the heart of the debate about the role of fair value accounting for financial stability. Chircop and Novotny-Farkas (2016) investigate banks' stock price reaction and investment behavior around news events up to the announcement of the final decision. I focus on the question of whether their evidence is sufficiently strong to convince either side in the debate.

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  • Laux, Christian, 2016. "The economic consequences of extending the use of fair value accounting in regulatory capital calculations: A discussion," Journal of Accounting and Economics, Elsevier, vol. 62(2), pages 204-208.
    • Handle: RePEc:eee:jaecon:v:62:y:2016:i:2:p:204-208
    DOI: 10.1016/j.jacceco.2016.10.005
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    References listed on IDEAS

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    13. Chircop, Justin & Novotny-Farkas, Zoltán, 2016. "The economic consequences of extending the use of fair value accounting in regulatory capital calculations," Journal of Accounting and Economics, Elsevier, vol. 62(2), pages 183-203.
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