Today, a consortium of interested trade associations, including the American Bankers Association, the Financial Services Roundtable and the Mortgage Bankers Association, sent a letter to Senators Christopher J. Dodd (D-CT) and Richard C. Shelby (R-AL), the Chairman and Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs, respectively, urging the Committee to address potential systemic risks posed by accounting standards in the consideration of the Senate’s comprehensive financial industry reform legislation.
The letter described negative effects that certain accounting standards played in the recent problems in financial markets. It noted that, while the SEC has responsibility for oversight in setting accounting standards, it does not have oversight over review of possible systemic risks posed by accounting standards.
The letter supports the continued independence of both the SEC and FASB, but asserted that, if the unintended consequences of an accounting standard or principle could exacerbate or create systemic risks, at a minimum the appropriate systemic regulatory body should advise the SEC of those risks. The letter urges a complete systemic risk review relating to accounting standards to address global concerns regarding the instabilities that unintended consequences posed to the financial system as part of any reform legislation.