Accounting for credit risk: are the rules setting the right incentives?
Banks again and again surprise the public with unexpected high provisions for loan losses sometimes threatening the financial viability of individual companies or even the stability of national financial systems. The paper analyses whether the patterns of loan loss provisions are, in part, attributable to the rules of accounting for credit risk. It compares the national German rules with the related IFRS rules and identifies inconsistencies across different types of transactions in both regimes. The analysis of the accounting rules is combined with an analysis of incentives for under-provisioning and/or over-provisioning, emanating from the capital markets and from banking supervisory authorities. The conclusion is that, in particular, the IFRS accounting rules should be changed to require a more comprehensive accounting for expected losses that can be measured reliably, using information readily available in the markets.
Volume (Year): 3 (2008)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.inderscience.com/browse/index.php?journalID=76|
When requesting a correction, please mention this item's handle: RePEc:ids:ijfsmg:v:3:y:2008:i:1:p:24-44. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Darren Simpson)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.