The event's main objectives were:
- to bring participants up to date with recent developments in banking regulation and accounting, especially the Basel III rules and progress with the new reporting standard for financial instruments (IFRS 9);
- to inform participants of the latest developments in insurance regulation and accounting, with a particular focus on the updated accounting standard for insurance (IFRS 4 Phase 2) and the EU's insurance directive (Solvency II);
- to obtain participants' views on which specific topics they would like the seminar series to cover in 2011.
Mr Diouman started the event by describing recent institutional developments - the change in leadership at the IASB and what progress had been made in the process of convergence between the IASB's IFRS and the US FASB's GAAP. June 2011 was now the target for convergence of the highest priority projects. The main area of disagreement between the two bodies was over how far fair value methods should be used, especially for valuing bank loans.
He went on to discuss developments in accounting for financial instruments and the regulation of banking. The IASB was in the process of producing a new standard for financial instruments (IFRS 9). Phase I of this (classification and measurement) had been completed, but the EU had not endorsed the new standard. Work on Phases II (impairment) and III (hedge accounting) were still continuing, though they might be completed in mid-2011. Outstanding issues include how to take account of losses expected in the future, especially whether they should be spread over time or taken upfront. It is already clear that IFRS 9 is more principles based than the IAS 39 standard that it replaces.
Mr Diouman then discussed the new Basel III rules. These increased the risk weights for some assets, tightened up the definition of capital (largely limiting it to "core equity") and raised required capital-asset ratios. In addition, Basel III introduces two new liquidity standards - a liquidity coverage (LC) requirement covering the short term and the net stable funding ratio (NSFR) for the medium term. Higher capital requirements for derivatives and inter-financial exposures as well as a capital surcharge for systemically important banks were intended to ease the "too connected to fail" and "too big to fail" problems that were at the centre of the recent financial crisis.
Mr Diouman then turned to insurance accounting and regulation. On the accounting side, the IASB published an exposure draft (ED) of the new more comprehensive IFRS 4 standard on accounting for insurance contracts (generally known as "IFRS 4 Phase II") in July 2010. Developing the new standard has taken a long time - an initial discussion paper was published in 2007 - and many hope that the outstanding issues can be resolved quickly, allowing the final standard to be published in June 2011.
On insurance regulation, the "Solvency II" framework directive had now been adopted by the EU, but some of the details of its implementation still needed to be worked out. It was planned that these would be finalized in 2011, with the new system going live in late 2012 or early 2013. Solvency II and IFRS 4 have different objectives but there is substantial overlap between them, so that it should be possible to make adjustments to the new IFRS 4 valuations in order in order to meet Solvency II requirements.
After presenting each section, Mr Diouman responded to questions from participants.
The event concluded with a request for participants to let the organizers know what specific topics they would like the seminar series to cover in 2011.
Participants obtained a comprehensive overview of recent developments in banking and insurance accounting and regulation. They highlighted some specific areas where they would like a more in depth treatment and several of these issues will be covered by seminars to be held in 2011.