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 financial crisis has highlighted the necessity of discussions on the adequacy of banking regulation and accounting standard-setting for financial institutions. We compare the development of several variables in this context between commercial banks, cooperative banks and savings banks from...

We investigate the relationship between the transparency of loan loss provision disclosures and the provisioning practices of privately held banks. We study a unique change in disclosure regulation under German banking law which introduces mandatory disclosures of loan loss provisions. Using...

This paper examines banks' disclosures and loss recognition in the financial crisis and identifies several core issues for the link between accounting and financial stability. Our analysis suggests that, going into the financial crisis, banks' disclosures about relevant risk exposures were...

We analyse micro and macro drivers of coverage ratios in a cross-country sample of euro area banks. Among the former, we find that coverage ratios increase with the reliance on deposit funding and when asset quality is very poor. Among the latter, coverage ratios increase with GDP growth and...

An important question in banking is how strict supervision affects bank lending and in turn local business activity. Supervisors forcing banks to recognize losses could choke off lending and amplify local economic woes. But stricter supervision could also change how banks assess and manage...

The loan impairment rules recently introduced by IFRS 9 require banks to estimate their future credit losses by using forward-looking information. We use supervisory loan-level data from Germany to investigate how banks apply their reporting discretion and adjust their lending upon the...

Loan loss reserves make up an essential part of a bank's soundness and more generally its viability. An under-provisioned reserve account implies that capital ratios may overstate a bank's ability to absorb future losses. For this reason, both supervisory authorities and investors regularly...

At the peak of the financial crisis in October 2008, the IASB amended IAS 39 to grant companies the option of abandoning fair value recognition for selected financial assets. Using a comprehensive global sample of publicly listed IFRS banks, we find that banks use the reclassification option to...