GENEVA - While the European market enjoys its most active year, accounting and regulatory concerns still blur the horizon. The European Securitisation Forum kicked off its 2004 ABS Summit with many of the themes that have stolen the show over the past few years.
While the market has taken considerable steps forward, panelists emphasized that many more issues need to be considered before the final implementation of Basle II and the new accounting regulations under the International Accounting Standards Board.
According to one speaker, after the next draft of Basle is released in June, the market will be in a state of transition, preparing for the final rules. "I think the question right now is Are they aiming to look at it as Basle II moving onto Basle III later, or will there be intermediate stages of implementation?'" the speaker said.
At the start of the year, the Basle committee reviewed its progress on the implementation of the new accord and addressed industry commentary on the additional proposals released in October 2003. The committee recently issued technical papers that outline its proposal to simplify the capital adequacy treatment of securitizations. It still maintains plans to meet a firm June 2004 deadline, when the next draft of the accord is expected to be out for commentary.
In a collective voice
Speakers at last week's conference noted that the industry's participation has had a positive influence on the development of the pending capital adequacy guidelines. With the 2006 final deadline looming, speakers emphasized that the window for action is closing. This call to arms was expressed in 2003 as well.
On accounting regulations, the mood was much of the same as a single set of accounting rules for all of the European Union banks approaches. The main conference kicked off last Wednesday, the day before the IASB released a set of new accounting rules, including an amendment to IAS 39.
Those in the field expect the new rules to be applied starting next year, despite the opposition of some European industry professionals. "I think that we are all tired and used to seeing this issue from a technical point of view," said Tom Jones, vice chairman of the IASB. "Over the last two years we've spent little time on the philosophical point of view of this framework."
More than 90 countries will begin using the new accounting regulations by next year, and the EU is expected to enforce it across Europe. U.S. companies will still follow U.S.-based accounting rules. "I think that we recognize the benefits of using one set of rules, " Jones said. "We are by definition converging to other standards. [On the U.S. side.] the FASB has changed [some of their stances] to bring their regulations more in line with us, and we have also changed to move more in line with their standards."
The body of the new regulations consists of 34 rules, with two or three new points introduced. Among those are rules on stock compensation, temporary insurance accounting and business combination standards, issues that already are addressed in U.S. GAAP.
Further, banks and insurers continue to pressure the EU for an exemption from the broader IAS regulation that would measure assets on a fair-value basis while liabilities remain at historic costs. Under the new rules, banks and insurers will be required to value assets on balance sheet at current market prices, which would create balance sheet volatility.