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Europe wants to adopt IAS 39 fair value amendment as soon as possible; EU bank regulators issue consultation on greater cooperation

BRUSSELS, July 8 (Global Risk Regulator) – The European Commission plans as soon as possible to adopt an amendment that will settle at least part of the row in Europe over the IAS 39 rule on valuing financial assets and liabilities in new international accounting standards.

The move also formally brings to an end a dispute over the so-called fair value option in IAS 39 in which banking supervisors argued that unlimited use of the option, as allowed in its original form, could be misused by weak banks to disguise their frailty and thereby possibly threaten financial stability.

The Commission, the executive arm of the European Union, said today that unless the European Parliament raised objections, an amended version of IAS 39 as it relates to the so-called fair value option will be adopted retroactively from January 1 2005. This would mean firms would be able to apply the amended rule in their 2005 financial statements.

Meanwhile, separately today European banking supervisors issued a consultation paper on guidelines for greater cooperation among EU regulators. The aim is to avoid any excessive burden on banking groups operating across the 25-nation EU bloc under the terms of the European version of the international Basel II bank safety rules.