Banking Management, Loans Loss Allowance and Accounting Standard

The regulatory rules of loan loss allowance have been controversial for a long time between the banking regulatory administration and accounting legislative administration. In particular, after the sub prime crisis, whether the expected-loss model developed by the International Accounting Standards...

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Bibliographic Details
Main Authors: Hua Zhou, Weida Kuang
Format: Conference Proceeding
Language:English
Subjects:
Accounting Principle
Accounting Principle of Prudence
Banking
Cost accounting
Economic indicators
Law
Loan Loss Allowance
Loss measurement
Prudential Supervision
Standards Board
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Summary:The regulatory rules of loan loss allowance have been controversial for a long time between the banking regulatory administration and accounting legislative administration. In particular, after the sub prime crisis, whether the expected-loss model developed by the International Accounting Standards Board is an appropriate approach to resolve this dispute is in question. This paper examines the various arguments of the U.S. financial markets in the last two decades. We find that there is a deviation between generally accepted accounting principles and banking regulatory rules, which gives rise to the persistent debates regarding banking provision. Accordingly, the expected loss model is not useful either for accounting legislation or banking regulation. The fundamental solution is to strictly distinguish and improve them respectively.
ISSN:2155-1456
2155-1472
DOI:10.1109/ICIII.2010.493