Fears have been driven by the international joint working group on accounting for financial instruments which has proposed applying market values to all bank financial instruments. In a new paper the committee, which includes UK and international standard-setters, said banks' financial assets and liabilities, such as loans, should be accounted for using fair or market value measurements. A modified historical cost basis is currently applied to UK 'banking books'. Banks use fair values for 'trading books' but say they should not be made to revalue longer-term instruments more frequently. 'This would require a lot more work for us and we would need more systems to prepare the value data because we could not do this easily,' said an accountant from a major high street bank. British Bankers Association director Paul Chisnoll and HSBC chief accountant Russell Picot are working on a response to the committee pointing out flaws in the recommendations. Chisnoll said: 'We do not believe that a compelling case has been made for reform so far and there has yet to be a meeting of minds and it has caused all sorts of problems.' The market value debate caused controversy this year among insurers while the ASB received a hostile reaction last month when it backed applying market values to pensions.
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