There's been some press attention to a speech that Andy Haldane, a Bank of England director, gave at the ICAEW's Information for Better Markets conference in December.

Of most interest to the media was the suggestion that banks ought to be able to follow a different set of standards to other businesses because, basically, banks are different. I'm afraid I don't agree.

Having discussed this a bit on Twitter, I do share Frances Coppola's concern over banks following the fair value model in a rising market, then seeking to abandon it when the market falls. But the accounting rules were very clear about what should be done. It was unacceptable political interference in those standards that led to the rules being relaxed. It's not clear to me how aligning bank accounting standards with prudential regulation will reduce political meddling. If anything, wouldn't it be likely to make it easier?

Secondly, we just don't need to change accounting standards to make prudential regulation more effective. The regulator already has a lot of power at its disposal to demand information. So why not use those powers instead of reducing the usefulness of information available for shareholders? The precedent is there in corporate tax: the tax authorities request what they need, and amend information in the financial statements if necessary. No serious commentator has suggested aligning tax and financial reporting to reduce tax avoidance. And Haldane's suggestion fails for the same reason.

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Filed under: Accounting, Regulation with tags andy haldane, bank of england, banks, frances coppola, fsa, ifrs, prudential regulation