Paris, May 13: Preparations to adopt two new sweeping financial reforms will cost French banks around USD 3.5 billion, more than they spent to get ready for the Euro’s arrival, a bank trade group said on Wednesday. The reforms — the Basel II capital rules and the switch to international accounting standards — demand intensive staff training at French banks, officials from the Federation Bancaire Francaise told reporters at a news conference. French banks spent €2bn preparing for the pan-European move to the Euro currency, the industry group said. The Basel II accord will regulate how much money banks must keep in reserves, to cushion against unexpected losses. At the same time, under European Union plans, stock-market listed companies in the 25-nation bloc must abandon national auditing rules and adopt International Accounting Standards by ’05.
The banks support the reforms, aimed at increasing financial stability, but are opposed to the IAS 39 rule, governing the way companies account for bonds, shares and derivatives. The rule limits the scope for banks accounting for hedging strategies, under which they use derivatives like interest rate swaps and credit derivatives to protect their loan portfolios and deposits against interest rates changes. The Federation Bancaire Francaise said the rule introduced an artificial volatility to banks’ results and capital bases. French banks continue to discuss modifications to this proposal with European counterparts, and could succeed in finding an acceptable solution by late summer or autumn, Ariane Obolensky, the head of the trade group, told reporters
Bureau Report