It looks like the IASB is really interested in our opinion on the own credit risk issue. If you want to give them your opinion (and mine is pretty clear) then you need to become a registered user of the IASB website (come on – you know you are really interested and you do not have to admit it to anyone) and then email them at “email@example.com”.
It would be worth doing if it gets them to a sensible position. Of course, many banks and other enterprises may find it “sensible” to allow the inclusion of own credit risk in the value of a liability – it would serve to reduce the disclosed value of the liabilities of the company, perhaps taking a failing enterprise to a position where they are then able to show a positive net worth. It would also improve the capital position of banks.
That would be a truly perverse outcome.
19 January, 2010 at 20:28
Interesting – I agree with you, and I’ve been surprised how few bankers (even from the strong banks) seem to have that view. How ridiculous is that if your credit rating goes down because your position is weakening, therefore your capital position is strengthened!
I might have to go and comment…