Banks could face costly rule change to help prevent crisis

Financial institutions could be forced to 'come clean' on losses but critics say change won't be a 'panacea'

Money
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BANKS could be forced to raise billions of pounds in fresh capital under proposed changes to the rules over how they account for assets. In a move intended to make the financial system less prone to a crisis, the International Accounting Standards Board (IASB) is proposing a major change in regulations to force banks to declare their losses earlier, reports the Daily Telegraph.

Currently banks only need to recognise a loss if it happens or if they believe it will go over a certain threshold. Under the "expected loss" rule change, lenders would have to recognise all the losses they could incur once there is evidence of any decrease in the value of a loan.

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