Attempts to streamline accounting standards for banks are running into problems with Europe and possibly the U.S. But this holy grail is well worth pursuing. The current hairballs of rules confuse almost everybody. Investors should keep the pressure up on policy-makers on both sides of the Atlantic, otherwise accounting incomprehension is likely to be just as much a feature of the next crisis as it was of the last.

The International Accounting Standards Board, which sets standards for most of the world outside the U.S., has led the charge for simpler rules. It wants just two ways of valuing financial assets – down from the current four. One is to value them at cost; the other to mark them to market. In order to qualify for the "cost" treatment, the bank would have to jump two hurdles. First, the asset would have to be a "loan-like" instrument producing contractual cash flows. Second, the bank itself would have to be in the business of holding assets in order to collect such cash flows rather than trading them.

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