IASB doubts new rules will ease boom-bust Banking regulators are wrong to hope that new accounting rules will curb cycles of boom and bust, according to the head of the International Accounting Standards Board. Hans Hoogervorst, IASB chairman, on Monday said his organisation had little power to prevent a repeat of the toxic loan damage at the heart of the financial crisis. "Economic cyclicality can be too powerful to be dented significantly by mere accounting," he said, suggesting that many banking regulators were incorrectly hoping that a revamp of IASB rules would do just that. The IASB sets the International Financial Reporting Standards followed by listed companies in the EU, Canada, Australia and other countries. Its mechanism for totting up losses on bad loans has been criticised for allowing banks to ignore the consequences of reckless lending for years and then get swamped by a sudden wave of losses. Addressing a European Central Bank conference in Frankfurt, Mr Hoogervorst argued that the attacks on the current rules for loan "impairments" were only partially justified. Banks had had leeway to apply the rules more vigorously in recent years, said the former Dutch finance minister, suggesting that writedowns of Greek sovereign debt last year could have been taken more quickly, for example. The IASB and the US accounting standard-setter, the Financial Accounting Standards Board, are nonetheless working on new loan impairment rules based on an "expected loss" model. By obliging banks to set aside more money against anticipated losses, the revamp hopes to address the "too little, too late" complaints directed at the current "incurred loss" model. The delayed revamp will still be based on subjective judgments, though, meaning that the new rules will not offer an infallible buffer against future events, Mr Hoogervorst cautioned. There is no guarantee that future bankers will do a much better job of anticipating risk than current bankers . . . Even with an expected loss model, many losses will only become apparent when the economic downturn sets in," he said. Mr Hoogervorst - who succeeded Sir David Tweedie at the IASB in 2011 - also queried whether the new Basel III banking regulation reform was strict enough. Under Basel III, a bank is still allowed to be leveraged 33 times. I am not a prudential regulator, but I truly wonder if a bank with leverage of even just 20 times can accommodate a crisis of Spanish or Irish proportions," he said. The IASB and FASB rewrite of loan impairment rules is part of a package of key accounting reforms that is now running at least two years late.