Separation And Coordination Of Accounting Report And The Banking Regulatory Report

The user of Bank accounting report is not only including investors, creditors, the social public, also including the bank supervisors. For the bank supervisors, the information providing by accounting report can not completely meet the needs of financial regulation. In some cases, accounting report even conflicts with the idea of financial supervision. In2008, the outbreak of the financial crisis happen to confirm this problem, the fair value accounting was blamed for causing the financial crisis. Although the SEC finally confirmed the root of the financial crisis is the excessive financial innovation and the lack of financial regulation, we can see the contradiction between accounting and financial regulation. The information of accounting report is objectively and neutrally, but the bank supervisors argue that accounting report should offer more information of bank risks, because of the great political, social, and externality effects of bank.We should resolve the contradiction between the accounting and financial supervision by respectively providing accounting report and the banking regulatory report. But the relationship between the banking regulatory report and accounting report is very close. Especially in1991, the United States embedded Generally Accepted Accounting Principles (GAAP) into bank regulatory rules, the banking regulatory report must be submitted in accordance with GAAP. Thus lead to accounting report and regulatory report getting together inappropriately. Our country not merging accounting report and regulatory report, but the basic data of the banking regulatory report is derived from accounting report. Because the target of accounting report is different from regulatory report, regulatory report generated just according to accounting report can’t achieve the goal of effective regulation. So this paper focuses on how to clarify the relationship between accounting reporting and the banking regulatory report, and how to solve the contradiction between them. The separation of the specific content of accounting reports and bank regulatory reporting more focuses on three aspects. The first one is the separation of asset-liability ratio and capital adequacy ratio. This separation is rooted by the definition of the accounting and financial capital. The accounting capital is listed on the accounting report capital (equity). It is investors putting into the enterprise for profit purposes. Regulatory capital also is called for bank capital. Regulatory capital not only needs to meet the requirements of setting up the company, but also able to absorb unexpected losses of banks. So in the calculation of the capital adequacy ratio, the accounting capital needs to be adjusted in accordance with regulatory capital.The second one is the separation of the accounting of asset impairment losses and regulatory provision. Accounting based on the principle of only objective evidence occurring that there is asset impairment, provision for asset impairment loss. This method is known as the "incurred loss model". But the occurrence of the financial crisis made people aware that "incurred loss model" has a strong pro-cyclical effects. Because there is not asking for impairment of expected credit losses into account. By the pressure from all sides, the international accounting standard-setting bodies expected loss model. But the model still has many defects, such as too subjective, difficult to operate, imperfect valuation model. The author thinks the asset impairment accounting loss "incurred loss model" can still be used. As for credit losses is expected to be reflected in the preparation of the bank regulatory reporting.The third one is the separation on the application of the fair value. Fair value accounting can provide more relevant and decision-making information. But fair value played a role in fueling the financial crisis. The fair value is based on fluctuations in the value of the market at to adjust the carrying value of the assets. Report data from fair value accounting not only closer to the market, but also significantly improve the transparency of accounting information. But fair value accounting will expand the volatility of bank statements, and adversely affect the stability of the financial system. This paper argues that the fair value as the measurement basis accounting reports, and bank regulatory reporting should try to eliminate the adverse consequences of the application of the fair value of the financial regulatory. There are many differences between accounting reports and bank regulatory reporting in the content, but there are close ties between the two reports at the same time. First, the accounting report is the basis data sources of the bank regulatory reporting. Secondly, accounting reports and bank regulatory reporting is a form of information disclosure, solving the problem of asymmetric information. Finally, accounting reports and bank regulatory reports have similar theoretical basis to achieve the optimal allocation of resources in order to solve the market failure. They also have the nature of government control. It is the basis for coordination exists between accounting reports and bank regulatory reporting. From three aspects of accounting reports and bank regulatory reporting coordination ways:First, make full use of accounting reports to improve the quality of banking supervision reports; actively adjust the differences between the accounting reports and bank regulatory reporting; Third, under the premise of respecting accounting independence, to strengthen the co-operation of the accounting and financial supervision.This paper adopts the method of normative research, analyzing accounting report and the banking regulatory report from the theoretical level. First, the paper discusses the basic theories of accounting reports and regulatory reports, including the meanings, objectives, characteristics and function of two kinds of reports. Then the paper studies the relationship between accounting report and the banking regulatory report. When analyzing the relationship, the paper elaborates on the diversity and unity of the accounting report and the banking regulatory report. It is because of the diversity that determining the separation of two kinds of reports; It is because of the unity that determining the coordination of two kinds of reports. Followed by the main content of the paper, that is the separation of accounting report and the banking regulatory report. This part consists of the origin of this problem, the reason of the separation, and the specific content of separation. The specific content of the separation between accounting report and the banking regulatory report includes three aspects:the separation of asset-liability ratio and capital adequacy ratio, the separation of assets impairment accounting and loan impairment provision, as well as the separation for applying fair value accounting. Finally, the paper proposes three ideas of coordinating two kinds of reports. They are making full use of the accounting report to improve the quality of the banking regulatory report, actively adjusting the differences between accounting report and bank supervision, and respecting for the independence of the accounting, strengthening the cooperation with financial supervision.This paper is divided into six chapter altogether. The first chapter is an introduction, which provides the background of the research, the research significance, related literature review, research methods, innovation and deficiency. Chapter2is the basic theories of accounting report and regulatory report, mainly summarizing the connotations, objectives, characteristics of accounting report, as well as the connotation, target, function of regulatory report. Chapter3studies the relationship between the banking regulatory report and accounting report. First, the accounting report is the basis of the financial supervision report; secondly, the accounting report and bank regulation have unity; finally, there are differences between accounting report and regulatory report. Chapter4is the separation of accounting report and the banking regulatory report. Because the basic aim of accounting report is inconsistent with the banking regulatory report, accounting report separating from the banking regulatory report is a popular trend. In terms of the specific content of separation, it includes three aspects:the separation of asset-liability ratio and capital adequacy ratio,the separation of assets impairment accounting and loan impairment provision, as well as the separation for applying fair value accounting. Chapter5is the coordination of accounting report and the banking regulatory report. From the aspect of the development of international banking supervision, accounting reports is still the basis of the banking regulatory report. The high quality of accounting report helps to improve the quality of the banking regulatory report. In respect of premising the independence of accounting, strengthening the cooperation of financial supervision and accounting is the key to coordinate two kinds of reports. Chapter6is the conclusion. As a result of different objective of accounting report and the banking regulatory report, the paper puts forward separating system of them, in order to meet the needs of different information users. But it is also necessary to strengthen the coordination of each other.There are three aspects of innovation of this paper. First, the paper enriches the research about Interdisciplinary Sciences of accounting and finance, and contributes to the development of accounting and financial regulation. Second, it goes deep into related question about accounting report and the banking regulatory report, and conduces to the development of accounting report and the banking regulatory report. Last, predecessors had come up with the point of separating accounting report and regulatory report, but there were not in-depth studies. The paper analyzes the reasons, detailed basis and content of the separation design of accounting report and the banking regulatory report, to solve the contradictions of accounting community and the financial community.