Moreover, any suggestion in public accounts that deposits are worth less than par could undermine the confidence on which the whole construct of banking is based. These illustrations suggest that different users of accounts may, at least to an extent, want information produced on different bases. And the simple fact is that we will not be able to make progress if different users all assert that their way of calculating or presenting the numbers is uniquely correct. I suggest, therefore, that the users of accounts should recognise that they may in reality need to adjust them to suit their particular purposes - something ratings agencies and other analysts have done for many years. It is encouraging that the Basel Committee on Banking Supervision has adopted precisely that approach in promulgating various adjustments for regulatory purposes to data based on IAS 39. Against that background, it would seem helpful if accounting standard setters required supplementary disclosures in published accounts which would allow different users to make such adjustments. This is important given that, unlike regulatory, fiscal and other public authorities, many private sector users are not in a position easily to obtain information beyond that put in the public domain. Let me turn now to IAS 39 itself as it impacts on the banking industry.
But the fact that firms are starting to grapple with implementation means that they’ve got past denial and bargaining and settled down to acceptance. Smaller firms may be lower down on the preparation curve, although presumably their total risks are also smaller. In December, the Federal Financial Institutions Examination Council presented a one-hour webinar on LIBOR transition that drew about 1,300 participants from supervised firms. Of those who responded to a polling question during the webinar, about one-fifth said it was the first time they were hearing about the topic. To continue forward, several issues must be resolved. For example, what events should trigger the shift from LIBOR to SOFR or another alternative rate? A definitive end to LIBOR is an obvious trigger. But, short of that, what events should prompt the switch? What if LIBOR was nominally available, but the UK FCA used its supervisory power to declare that LIBOR is unrepresentative of the underlying market? Last month, an FCA official highlighted the possibility that this is exactly how the end of LIBOR might come about, and urged market participants to seriously consider this possibility when crafting their fallback triggers.23 In their various consultations on fallback language, the ARRC has proposed that such a declaration by the FCA would trigger the switch to an alternative rate. A clear majority of respondents supported that proposal. I think every market participant should ask how the fallback triggers in their contracts would respond. In addition, the precise mechanism of changing from LIBOR to, say, SOFR will vary.