Accounting for financial instruments in the banking industry : [Version Juli 2002]

Recent changes in accounting regulation for financial instruments (SFAS 133, IAS 39) have been heavily criticized by representatives from the banking industry. They argue for retaining a historical cost based "mixed model" where accounting for financial instruments depends on their designation to either trading or nontrading activities. In order to demonstrate the impact of different accounting models for financial instruments on the financial statements of banks, we develop a bank simulation model capturing the essential characteristics of a modern universal bank with investment banking and commercial banking activities. In our simulations we look at different scenarios with periods of increasing/decreasing interest rates using historical data and with different banking strategies (fully hedged; partially hedged). The financial statements of our model bank are prepared under different accounting rules ("Old" IAS before implementation of IAS 39; current IAS) with and without hedge accounting as offered by the respective sets of rules. The paper identifies critical issues of applying the different accounting rules for financial instruments to the activities of a universal bank. It demonstrates important shortcomings of the "Old" IAS rules (before IAS 39), and of the current IAS rules. Under the current IAS rules the results of a fully hedged bank may have to show volatility in income statements due to changes in market interest rates. Accounting results of a partially hedged bank in the same scenario may be less affected even though there are economic gains or losses

Financial instruments fair value accounting for (not against) the banking industry

The paper analyses the effects of three sets of accounting rules for financial instruments - Old IAS before IAS 39 became effective, Current IAS or US GAAP, and the Full Fair Value (FFV) model proposed by the Joint Working Group (JWG) - on the financial statements of banks. We develop a simulation model that captures the essential characteristics of a modern universal bank with investment banking and commercial banking activities. We run simulations for different strategies (fully hedged, partially hedged) using historical data from periods with rising and falling interest rates. We show that under Old IAS a fully hedged bank can portray its zero economic earnings in its financial statements. As Old IAS offer much discretion, this bank may also present income that is either positive or negative. We further show that because of the restrictive hedge accounting rules, banks cannot adequately portray their best practice risk management activities under Current IAS or US GAAP. We demonstrate that - contrary to assertions from the banking industry - mandatory FFV accounting adequately reflects the economics of banking activities. Our detailed analysis identifies, in addition, several critical issues of the accounting models that have not been covered in previous literature. December 2002. Revised: June 2003. Later version: http://publikationen.ub.uni-frankfurt.de/volltexte/2005/1026/ with the title: "Accounting for financial instruments in the banking industry : conclusions from a simulation model

Accounting for financial instruments in the banking industry: conclusions from a simulation model

The paper analyses the effects of three sets of accounting rules for financial instruments - Old IAS before IAS 39 became effective, Current IAS or US GAAP, and the Full Fair Value (FFV) model proposed by the Joint Working Group (JWG) - on the financial statements of banks. We develop a simulation model that captures the essential characteristics of a modern universal bank with investment banking and commercial banking activities. We run simulations for different strategies (fully hedged, partially hedged) using historical data from periods with rising and falling interest rates. We show that under Old IAS a fully hedged bank can portray its zero economic earnings in its financial statements. As Old IAS offer much discretion, this bank may also present income that is either positive or negative. We further show that because of the restrictive hedge accounting rules, banks cannot adequately portray their best practice risk management activities under Current IAS or US GAAP. We demonstrate that - contrary to assertions from the banking industry - mandatory FFV accounting adequately reflects the economics of banking activities. Our detailed analysis identifies, in addition, several critical issues of the accounting models that have not been covered in previous literature

Zwischen Solidarität und Paternalismus: Ein postkolonialer Blick auf kirchliches Sprechen in der deutschen Migrationsgesellschaft

Die Kirchen sind mit ihrer migrationsfreundlichen Haltung von rassistischen und fremdenfeindlichen Stimmungen in der deutschen Gesellschaft herausgefordert. Neben der klaren Abgrenzung von solchen Positionen ist für sie die Frage nach Gründen für deren Auftreten relevant. Auf diese reagieren postkoloniale Theoretiker*innen mit dem Verweis auf Denkmuster kolonialen Ursprungs, die in der Aktualität weiterwirken. Dieser Zusammenhang von Fremdenfeindlichkeit und Kolonialismus wird plausibilisiert, indem postkoloniale Konzepte im Hinblick auf den Umgang mit Migration in Deutschland rezipiert werden. Es wird deutlich, wie die fehlende Auseinandersetzung mit den Folgen der Kolonialzeit die Einstellungen gegenüber Menschen aus ehemaligen Kolonialgebieten nach wie vor beeinflusst. Daran anschließend zeigt die exemplarische Untersuchung von zwei Dokumenten der DBK zu Migration aus einer postkolonialen Perspektive, inwiefern auch kirchliches Sprechen Zusammenhänge kolonialen Ursprungs ausblendet und entsprechende Haltungen reproduziert. Daher werden abschließend mögliche Folgerungen dargestellt, die sich aus dieser Analyse für kirchliches Sprechen ergeben können, um sich noch deutlicher gegen Fremdenfeindlichkeit zu positionieren.The churches with their migration-friendly attitude are challenged by racist and xenophobic attitudes in German society. In addition to the clear distancing from such positions, the question of reasons for their occurrence is relevant for them. Postcolonial theorists react to this issue by referring to patterns of thought of colonial origin that continue to have an effect in the present. This connection between xenophobia and colonialism is made plausible by the reception of postcolonial concepts with regard to dealing with migration in Germany. It becomes visible how the lack of confrontation with the consequences of the colonial period continues to influence attitudes towards people from former colonial areas. Subsequently, the exemplary investigation of two documents of the German Bishops' Conference on migration from a post-colonial perspective shows to what extent church discourse, too, ignores contexts of colonial origin and reproduces corresponding attitudes. Finally, thus, possible conclusions that may result from this analysis for church discourse in order to position itself even more clearly against xenophobia are presented