EU lawmakers to fast-track accounting rule capital relief

European Union lawmakers will fast-track rules giving banks breathing space to comply with a new accounting standard that forces them to provision upfront for possible defaults on loans. The new "IFRS 9" accounting rule applies from next January, and is likely to push down a bank's core capital ratio, a benchmark of financial health that is closely tracked by investors, even though the level of risk remains unchanged.
Global regulators have proposed a transition period of up to five years for banks to build up provisioning to required levels under the rule, but it needs to be introduced into EU law to take effect. An EU legislative proposal is now before the European Parliament and the bloc's member states, but approval of EU rules can often take many months, which would leave banks having to comply with the accounting rule in full from day one. "We have decided to fast-track ... IFRS 9," Roberto Gualtieri, chairman of parliament's economic affairs committee, said on Tuesday.