Market discipline stems Level 3 asset manipulation – paper

The Bank of England

A new Bank of England (BoE) working paper indicates that market discipline is "effective in moderating" the tendency for banks to use accounting discretion with regard to Level 3 assets – assets whose fair value cannot be determined by using observable measures, such as market prices or models – to ensure they have lower capital ratios.

In Accounting discretion, market discipline and bank behaviour: some insights from fair value accounting, Regis Bouther and William B Francis use quarterly data

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