The Influence Of Financial Instrument Accounting Standards On Banking Regulation And Supervision And The Policy Advice

The Ministry of Finance published its 39 Corporate Accounting Standards (CAS) in Feb 15th 2006, and they're effective from Jan 1st 2007. All public companies are required to apply the new accounting standards. Among the 39 new landmarks accounting standards, four of them are closely related to banking regulation and supervision: the No.22, the No. 23, the No. 24 and the No. 37 which together form the so called Financial Instrument Accounting Standards (FIAS). The new Standards which have borrowed the genuine fruits of International Accounting Standards (IAS) will be a strong push in upgrading the risk management capability in our banking industry, and improving their comprehensive competitive strength.Under this background, the significant change in CAS brought in by the FIAS which is the cornerstone of Banking Regulation and Supervision (BRS) will surely exert influence on our BRS system. Since the FIAS has absorbed all the best fruit from IAS, and IAS in turn is a product of years'of negotiation between BRS authorities and IASB, we have good reason to believe FIAS has take into consideration of BRS objectives to its largest possible extent, therefore, FIAS will be an opportunity for BRS authority to enhance their endeavors. However, more important than that, CAS serves different objectives from BRS, and the introduction of Fair Value Accounting in FIAS will make the old suit of BRS no longer suitable. From this perspective, the FIAS is more a challenge than an opportunity.As the practice of our country is one step ahead of other main economies, the existing discussions on this topic are left behind. While the western countries-especially the European countries are still discussing whether accepts the IAS or accepts it by what kind of route, we have move ahead and implemented it. Unlike in the foreign countries, the Chinese scholars, after the launch of CAS last year, discussed intensively on this topic, and there have been tremendous advices on how to adjust the BRS ratios to avoid the interference of FIAS.Very little discussion focuses on Why on earth the influences come, and What could BRS authorities do other than simply, negatively, insists on the current BRS system without communication with CAS. All these gaps are what this paper makes endeavor to try finding out a path.The paper puts all the influences into three categories, the Ratio, the BRS objectives, and the Authorities, and analyses them respectively.After the examination on What, the paper shoots for Why. Unlike what we already have on the desk which separates FIAS and BRS apart, the paper takes a close look at both FIAS and BRS, and trying to dig out the deepest root in order to approach a thorough cure.Lastly, based on all the labor above, the paper brings out its advice for BRS authorities on how to react now, and how to evolve in the future.