Euro banks face transitional derivative rules

European banks may have to have to use transitional accounting standards for up to two years even if the current disagreement over derivatives standards is resolved sooner, according to EU single market Commissioner Frits Bolkestein.

Derivatives accounting standards, proposed by the International Accounting Standards Board, are scheduled to enter force on January 1 2005 but there is still debate over their potential effect. French president Jacques Chirac claims they will introduce unacceptable “volatility” into financial statements. But the IASB, with the support of banks such as HSBC, believes the new rules are an important step towards convergence with the US.