Authors: Panagiotis Papadeas, Alina Hyz, Evangelia Kossieri

Title: IASBasel: The contribution of losses to the banks' capital adequacy

Abstract

The social cost of a bank failure exceeds the direct losses to the claim holders of the failing bank. Simultaneously the costs and externalities associated with a bank failure are likely to be much larger than those created by the failure of a commercial non-bank entity. Consequently, it becomes obvious that the interest of banking supervisors (Basel Committee) is directed to the expansion of the capital adequacy of banks and to the wider disclosure of the respective comparable information through International (Accounting) Financial Reporting Standards / IFRS - IASB. One of the major accounting issues for banks (at the end of each year) is the deferred taxation. The term is used to indicate the temporary differences that arise when comparing the taxable profit and accounting profit. Thus, the losses of the haircut in 2012, affected the need of banks' recapitalization, since it was calculated in equity. Along with the credit risk provisions, they caused the difference between the taxable and accounting profit. As deferred tax assets, they are offset during the next years with potential income tax resulted from the banks' activities. Then, the "right" for capitals offsetting is guaranteed, without real capitals, but is measured and counted, subject to conditions, for the calculation of capital adequacy of banks. The aim of this study is to analyze the above relations and to quantify them, using data of Greek banks listed on the Athens Stock Exchange.