IIF calls for Basel and IASB co-operation; warns on Basel II deadline

The Institute of International Finance (IIF), an association of leading banks, has called for more co-operation and discussion on bank capital accounting issues between the Basel Committee on Banking Supervision and theInternational Accounting Standards Board (IASB).

Speaking at a press conference in London today, Daniel Bouton, chairman and chief executive of Société Générale, and chairman of the IIF's steering committee on regulator capital, said: "Basel and the IASB do not speak the same language about what capital is.”

In particular, the IASB is proposing that banks should implement a system of dynamically provisioning against credit risk, while the Basel Committee's proposed Accord on regulatory capital – Basel II – suggests banks should model expected losses. The danger is that banks could be caught in the middle of any disagreement between central bank supervisors and accounting standards bodies, said Bouton.

"At present there is no dialogue between the two [Basel and the IASB], so any discussion will be welcome,” Bouton told Risk News. The IIF would like to see a "convergence" of the different approaches to valuing bank capital, he said.

Bouton added that the IIF had received a favourable response from regulators to its suggestion that there should be more co-operation.

But he also warned about the amount of work facing the Basel Committee and banks before Basel II can be effectively implemented. He said it "may be wise" to postpone the implementation of the new Accord, currently scheduled to be implemented at the end of 2006.