Accounting for financial stability : lessons from the financial crisis and future challenges
- This paper investigates what we can learn from the financial crisis about the link between accounting and financial stability. The picture that emerges ten years after the crisis is substantially different from the picture that dominated the accounting debate during and shortly after the crisis. Widespread claims about the role of fair-value (or mark-to-market) accounting in the crisis have been debunked. However, we identify several other core issues for the link between accounting and financial stability. Our analysis suggests that, going into the financial crisis, banks’ disclosures about relevant risk exposures were relatively sparse. Such disclosures came later after major concerns about banks’ exposures had arisen in markets. Similarly, banks delayed the recognition of loan losses. Banks’ incentives seem to drive this evidence, suggesting that reporting discretion and enforcement deserve careful consideration. In addition, bank regulation through its interlinkage with financial accounting may have dampened banks’ incentives for corrective actions. Our analysis illustrates that a number of serious challenges remain if accounting and financial reporting are to contribute to financial stability.
Author: | Jannis BischofORCiDGND, Christian LauxORCiDGND, Christian LeuzORCiDGND |
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URN: | urn:nbn:de:hebis:30:3-438703 |
DOI: | https://doi.org/10.2139/ssrn.3393148 |
Parent Title (English): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 622 |
Series (Serial Number): | CFS working paper series (622) |
Publisher: | Center for Financial Studies |
Place of publication: | Frankfurt, M. |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2019 |
Year of first Publication: | 2019 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2019/06/24 |
Tag: | Banks; Disclosure; Fair value accounting; Financial crisis; Financial stability; Loan loss accounting; Mark-to-market |
Issue: | December 2018 |
Page Number: | 76 |
HeBIS-PPN: | 450504824 |
Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Licence (German): | Deutsches Urheberrecht |