Many observers have argued that the fall in RMBS prices during the crisis was partly caused by fire sales. We provide an explanation for why financial institutions may have engaged in fire sales using a unique dataset of RMBS transactions for insurance companies. We show that risk-sensitive...

Accounting standard setters are considering the wider use of fair value accounting. This paper focuses on the financial stability implications of a move in the banking sector from the current accounting framework to full fair value accounting. A simulation exercise is performed on how various...

The calculation of the regulatory capital ratios according to the Capital Requirements Regulation (CRR) is based on the IFRS consolidated financial statements. Therefore, banks are able to influence their regulatory capital ratios through discretionary powers when measuring with fair values...

The principles characterizing the traditional revenue-expense approach to accounting have never been “invented.” They are an institution that is the result of social evolution, not of human design. Therefore, the efforts to defend them against the balance sheet approach endorsed by...