The economic consequences of extending the use of fair value accounting in regulatory capital calculations: A discussion

• Autores: Christian Laux
• Localización: Journal of accounting and economics, ISSN 0165-4101, Vol. 62, Nº. 2-3, 2016, págs. 204-208
• Idioma: inglés
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• Resumen

  • Abstract When the Federal Reserve, following Basel III, proposed removing the accumulated other comprehensive income (AOCI) filter that shields regulatory capital from unrealized gains and losses on available-for-sale (AFS) debt securities, it triggered fierce opposition. The topic is at the heart of the debate about the role of fair value accounting for financial stability. Chircop and Novotny-Farkas (2016) investigate banks' stock price reaction and investment behavior around news events up to the announcement of the final decision. I focus on the question of whether their evidence is sufficiently strong to convince either side in the debate.