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Basel Committee reform package receives support

The Group of Governors and Heads of Supervision of the Basel Committee on Banking Supervision has agreed on the design of a capital and liquidity reform package.

The proposals change the treatment of various accounting balances, including an override of local GAAP in favour of IFRSs in relation to some intangible assets.

Reform proposals expected to affect the accounting profession include:

  • An option to use IFRS in determining the level of intangible assets if national GAAP resulting in a wider range of assets, such as certain software assets, being classified as intangible;
  • Definition of the leverage ratio, which would strengthen the treatment of derivatives relative to the purely accounting based measure and provide a simple way of addressing differences between IFRS and GAAP; and,
  •  Forward looking provisioning. The Committee proposes to implement the expected loss approach to provisioning proposed by the International Accounting Standards Board.

The Basel Committee’s proposed reforms were originally published in December 2009 and the Governors and Heads of Supervision, which oversees the committee, considered public feedback before reaching a consensus.

The committee will finalise the regulatory buffers before the end of the year while the Governors and Heads of Supervision will finalise the calibration and phase-in arrangements at their meeting in September.

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