The economic consequences of extending the use of fair value accounting in regulatory capital calculations: A discussion

Publication: Scientific journalJournal articlepeer-review


When the Federal Reserve, following Basel III, proposed removing the accumulated other comprehensive income (AOCI) filter that shields regulatory capital from unrealized gains and losses on available-for-sale (AFS) debt securities, it triggered fierce opposition. The topic is at the heart of the debate about the role of fair value accounting for financial stability. Chircop and Novotny-Farkas (2016) investigate banks' stock price reaction and investment behavior around news events up to the announcement of the final decision. I focus on the question of whether their evidence is sufficiently strong to convince either side in the debate.
Original languageEnglish
Pages (from-to)204 - 208
JournalJournal of Accounting and Economics
Issue number2-3
Publication statusPublished - 2016

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