US embassy cable - 04THEHAGUE1906

UNCLAS THE HAGUE 001906 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN, ECON, NL, EUN 
SUBJECT:  ACCOUNTING STANDARDS: AEGON CFO REVIEWS STATE OF 
PLAY; CALLS FOR U.S.-EUROPEAN CONVERGENCE 
 
1. Jos Streppel, the Chief Financial Officer of AEGON, a 
large Netherlands-based insurance group also active in the 
U.S., met with the Ambassador July 28 to review current 
efforts to unify European accounting standards and to 
achieve greater harmonization between the U.S. and Europe in 
this area.  Streppel, who serves as chairman of the CFO 
Forum of the 20 leading European insurance companies, was 
reasonably confident that agreement would be reached on the 
EU-wide adoption of International Accounting Standards 
(IAS).  Somewhat surprisingly, he did not single out French 
opposition to the proposed IAS-39 rule on the valuation of 
derivatives and other financial instruments as being the 
most difficult obstacle standing in the way of agreement; he 
thought that the French would bargain hard but eventually 
join with the European consensus on this issue.  Instead, 
Streppel suggested, the quieter but firm opposition of the 
Spanish and Italians would be a more difficult problem to be 
overcome. 
 
2. Streppel repeated the view expressed by the European 
Accounting Forum that the mark-to-market rule in the 
proposed IAS-39, which is closer to U.S. accounting 
practice, would lead to greater volatility on corporate 
balance sheets and thus tend to increase the cost of 
capital.  He noted that, particularly for insurance 
companies, with the long duration of their liabilities, 
fixing the value of those liabilities by market prices 
prevailing on a single date (e.g., December 31) made little 
sense.  Nonetheless, he said, the goal for U.S. and European 
regulators over the next several years should be to achieve 
convergence between the IAS and U.S. GAAP.  Phase 2 of the 
adoption of the IAS, expected in 3-4 years, would be a good 
target date for such convergence.  Failing that, Streppel 
said, he hoped that the U.S. and Europe could at least agree 
on the mutual recognition of IAS and GAAP, eliminating the 
need for companies listed on both sides of the Atlantic to 
maintain two sets of books. 
 
3. Asked about what particular regulatory issues AEGON faces 
in the U.S., where it is the No. 3 life insurance provider 
(through ownership of Transamerica and some 20 other 
companies), Streppel mentioned (a) the issue of dealing with 
50 state regulatory authorities, (b) the longer approval 
process for new products and services faced by insurance 
companies than by banks (insurance companies require 
explicit regulatory approval for each such product, whereas 
banks do not), and (c) the potential for different solvency 
requirements for insurance companies operating in the U.S. 
and Europe when the EU adopts its "Solvency II" rules, akin 
to the banks' Basel II, in several years.  Streppel again 
hoped that harmonization of such solvency rules between the 
U.S. and Europe could be achieved. 
 
 
SOBEL