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Loan loss dynamics

The International Accounting Standards Board unveiled a new expected loss approach in November, following criticisms of the current incurred loss model. But European regulators have declared their preference for dynamic provisioning – and have even threatened to mandate such an approach if the accounting bodies do not introduce it themselves. Which side will blink first? By Duncan Wood

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When leaders of the Group of 20 countries met in London at the start of April, one of their chief concerns was pro-cyclicality – an array of forces that served to magnify the severity of the financial crisis. They arrived at the meeting armed with a report from the Financial Stability Board (FSB) blaming loan-loss accounting for part of the problem and calling for new standards to recognise losses

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