Finance & Accounting

Did banks underreport losses and delay disclosures during the financial crisis?

Politicians, regulators, and pundits have criticized banks' financial reporting as a key culprit of the problem in the financial crisis 2008–2009 and have called for changes. But is the criticism really justified? What changes are necessary? In a recent study, Professor Christian Laux from the Institute for Finance, Banking and Insurance at WU (Vienna University of Economics and Business) and his co-authors examine the disclosure and recognition of losses of international banks during the financial crisis. The authors also investigate the consequences of a regulation that reduces the impact of losses on banks’ required regulatory capital. The evidence is important to guide standard setting and recent debates in bank regulation.