“Regulatory and accounting rules are important determinants of bank behaviour; however, the interaction of the two is often not well understood and their intended outcomes do not always align. This Basel Committee working paper reviews academic literature on the interplay of accounting and regulatory frameworks, how these two regimes affect bank behaviour and whether regulatory and accounting requirements can be used to counter unintended outcomes and/or reinforce prudential objectives. The review explores the following questions:

• How can fair value accounting contribute to default contagion in crisis times?
• What are the implications of different provisioning regimes for bank management?
• What are the implications for bank behaviour of prudential filters and their removal?
• To what extent can disclosure of accounting information enhance market discipline?”