FRC backs Turner's cycle reserve plans

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The Financial Reporting Council (FRC) said it supports Lord Turner's suggestion of an 'economic cycle reserve' (ECR) to bolster bank balance sheets.

The FRC has promoted the idea of an ECR both within the UK and through the International Stability Forum.

Just before the Turner review was published, the Accounting Standards Board (ASB) held a meeting of 40 representatives including investors, accountancy firms, banking industry representatives and regulators to discuss counter-cyclical measures.

An ECR would be built up during the upswing of the economic cycle through an appropriation from retained profits. It would be an undistributable balance sheet reserve, limiting a banks ability to pay dividends and make share buybacks during the upswing and available to be released in the bad...

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