Taking Diversity into Account: the Diversity of Financial Institutions and Accounting Regulation

Gaëtan Le Quang ()
Additional contact information
Gaëtan Le Quang: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

Working Papers from HAL

Abstract: The global financial crisis and what followed point out at least two major failures of the financial system: its inability to contain liquidity risk and its inability to fund long term investments. We think that these two problems come from the setting up of rules and practices that tend to homogenize market participants' incentives and behaviors. Fair value accounting is one element of this set of practices and rules. If the rationale behind fair value accounting – that is enhancing transparency in order to limit unreported losses and manipulations – can justify its use in the case of short-term financial institutions (meaning institutions whose time horizon is short because of the maturity of their liabilities) that constantly face the risk of a sudden liquidity need, it seems totally irrelevant when it comes to long-term financial institutions that will not face liquidity needs before ten or twenty years. In this perspective, we develop a model that shows that an accounting regulation that takes the diversity of financial institutions into account offers better results both in terms of liquidity and in terms of efficiency than a regulation that ignores this diversity.

Keywords: Fair value; Banks; Insurers; Diversity (search for similar items in EconPapers)
Date: 2017
Note: View the original document on HAL open archive server: https://hal.science/hal-04141663
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://hal.science/hal-04141663/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-04141663

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().