French and German insurance companies are fighting back against proposed changes to accounting rules that they say would require them to dump stocks and structured products from their portfolio. Markets would obviously be roiled if these big institutional investors woound up dumping securities en masse.
At issue is a change proposed by the International Accounting Standards Board (IASB) to the way financial institutions value securities. The IASB published a proposed to change IAS 39 yesterday. It would allow financial firms to value bonds and other fixed income securities with fixed maturities should be valued at cost. Stocks and structured products, however, would be marked-to-market.
The German insurers have said this rule would require them to dump the stocks they hold in their portfolio, since the effects of market volatility on their capital position would be unbearable. So far the finance ministers of Germany and France support the insurers, who are calling for softer, more flexible rules. The European Commission is reportedly supporting the IASB.
So the mark-to-market wars continue.
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