If market discipline is to function, accounting boards themselves must find better, more-innovative solutions that more accurately capture the underlying economics of transactions.
Moreover, with regard to securitizations, derivatives, and other innovative instruments that can transfer risk, it is not at all clear that accounting measures of a company’s balance sheet at a given point in time are sufficient to reflect the company’s financial risk profile. As bank regulators, we recognize the need to strike the right balance in deciding what disclosure standards to promote.