Small banks may become bankrupt when switching to IAS

The Russian government will consider the issue of transferring Russian enterprises to International Accounting Standards at its meeting in a few days. Russian Central Bank deputy head Andrey Kozlov declared the other day that domestic banks would be the first to switch to IAS. According to him, this obligatory transfer to IAS will result in stricter control over them. This should happen over the next two years. Durning this period of time domestic banks should stop laundering money and inflating their capital. According to Kozlov, every fifth bank inflates its capital currently, the Nezavisimaya Gazeta newspaper reported. Moreover, the Central Bank is going to control those banks that will participate in the system of insuring deposits. At the same time Alexander Murychev, the head of the association of regional banks Rossiya, declared that more than 120 large and medium-sized banks already prepared financial statements in accordance with IAS. The toughing of control by the Central Bank will make banks clear their balances and provide transparency, Murychen believes. At the same time bankers point to serious expenses credit organizations will face when they have to switch to IAS. Murychev noted that it might be about $100,000 for every bank. According to vice president of BIN Bank Alexey Guskov, expenses on auditing will at least double. Moreover, there are doubts that the new standards will help improve the auditing of banks. "If IAS reports are audited by just four auditing companies, the number of their clients will increase immediately, which will result in an increase in prices of their services and there will be lines," Guskov said. Meanwhile, it will take some time for Russian auditing companies to obtain experience of IAS auditing. Simplification of the rules of auditing may not increase transparency, Guskov noted.

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