Banking Management, Loans Loss Allowance and Accounting Standard

The regulatory rules of loan loss allowance have been controversial for a long time between the banking regulatory administration and accounting legislative administration. In particular, after the sub prime crisis, whether the expected-loss model developed by the International Accounting Standards Board is an appropriate approach to resolve this dispute is in question. This paper examines the various arguments of the U.S. financial markets in the last two decades. We find that there is a deviation between generally accepted accounting principles and banking regulatory rules, which gives rise to the persistent debates regarding banking provision. Accordingly, the expected loss model is not useful either for accounting legislation or banking regulation. The fundamental solution is to strictly distinguish and improve them respectively.