The ECB has been championing enhanced transparency and valuation practices as well as consistency at the international level and will continue following all relevant developments given the importance of accounting standards to financial stability. Third, reviewing regulation on capital adequacy to assess the extent to which the current regulatory framework encourages procyclical behaviour by financial institutions is pivotal in promoting financial stability.
In the short term, regulators have agreed to avoid measures that will in effect tighten capital requirements, impinging on the financial standing of banks and negatively impacting the supply of credit and the economy as a whole. At the same time, work has been initiated to investigate the impact of factors potentially contributing to procyclicality from a longer-term perspective.