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Paraphrasing the word that Clemenceau applied to the military, the French Banking Federation believes that accounting is too serious a matter to be left to the discretion of “accounting ideologues alone”. [1] It therefore suggests that the IASB be supervised by a monitoring group of European regulators. This request was echoed by Gérard Mestrallet, who has been known to be more measured[2]in a Point of View published a few days later in the same newspaper.

THE DIFFICULT PROBLEM OF BANKING ACCOUNTING STANDARDS

The hostility of French banks to IFRS 39 and its author is long-standing and tenacious. It is therefore not surprising that, through their representative body, they are keeping up the pressure at a time when the IASB has just published its draft reform of the much criticised standard.

Contrary to its allegedly autistic nature, the IASB has just published a draft reform of IFRS 39 that clarifies the conditions for valuing instruments, in line with the American regulator. This is undoubtedly a step forward in terms of globalisation, but it is perhaps a step backwards in terms of the quality of the information provided. Indeed, it is a globalisation on the cheap; it is well known that the FASB has given in to the demands of the American banking lobby, relayed by a few members of Congress who have won over its cause. In reality, behind technical considerations, the FBF is waging a political battle: it is a question of not allowing American banks to benefit from accounting rules that are more favourable than ours[3].

The difficulty with bank accounting rules is that they must serve both to inform the investor about the state of an institution, and to set the prudential capital requirements for that institution. It is the automatic link between accounting rules and prudential rules that is the problem. Should we therefore, on the pretext of stability of accounts in an unstable world :

  • reconstitute latent reserves under the pretext of dynamic provisioning;
  • blur the assessment that can be made of a number of assets by constantly rearranging the definition and boundaries of different portfolios?

The organic link between the accounting and supervisory authorities needs to be improved without putting the former under the control of the latter.

GOVERNANCE OF THE IASB

The banking world is riding a very bad horse by asking to reintegrate political power over a body whose independence from said power is one of its most precious assets. Need I remind you :

  • that the IASB now has a global reach that goes far beyond Europe and that the current composition of the Board reflects this globalisation[4]?
  • that the current members of the Board, far from being ideological accountants, are for the most part people who have had important and very concrete financial responsibilities?

The IASB has just responded to the justified request for better liaison with the public authorities in charge of accounting or stock market issues. This will take the form of a “Monitoring Group”:

  • composed of representatives from various institutions around the world, including the European Commission;
  • responsible for appointing trustees and supervising their activities.

Mr Mestrallet et al. consider that the step is insufficient and ask for “more government”. Is it really the role of companies to clamour for increased representation of public authorities in the IASB? They will be the first, after having brought the fox into the henhouse, to complain about decisions taken for political rather than technical reasons.

Will the balance be maintained between the necessary independence of the IASB Board and the consideration of the needs, however changing or contradictory, of politicians, who are not the only representatives of the public interest? Let us be optimistic: this is roughly the model of the US Supreme Court: the judges are appointed by the President, but are radically independent of him once appointed.

The IASB was right not to remain inert in the face of the crisis. It would be wrong to fall in line with the American lowest common denominator in terms of substance, and to accept to sacrifice its due process in terms of form. The stability of the rules is at least as important as their content; G. Mestrallet recognises this in his “point of view”: “the IASB’s mandate should be completed to include the principles of prudence and stability”. As for the idea that politicians necessarily have the last word on matters that remain largely technical, this is the idea that leads straight to the socialist biology of the late Lyssenko.

Accounting rules are a public good, we hear. That is true. Why not have it administered by an international body of public law? But who is capable of setting it up and making it work?

Dominique LEDOUBLE


[1] Expression employée par Pierre de Lauzun dans Les Echos, 28 mai 2009.
[2] « Il est temps de tirer les leçons de la crise » Point de Vue de Gérard Mestrallet, Gerhard Cromme et Michel Pébereau, les Echos 2 juin 2009.
[3] C’est le même type de raisonnement qui avait conduit le CNC à admettre une règle, le défunt § 215, permettant d’enregistrer l’acquisition d’une entreprise aux valeurs nettes comptables dès lors qu’elle est payée en titres de l’acquéreur. La facilité ainsi offerte aux groupes français s’est traduite par une fringale d’acquisitions, illustrée notamment par les déboires de Vivendi et de France Telecom.
[4] La France est plutôt sur-représentée puisqu’elle compte deux administrateurs, MM. Danjou et Gélard.

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