Banks hesitate on fair-value option for loans

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Most banks have decided against using the fair-value option for loan books under International Financial Reporting Standards, say market participants. The fair-value option allows banks to mark-to-market loans at inception, rather than account for them on an accrual basis. This may eliminate or reduce the accounting mismatch caused by credit default swap positions, which are used by many banks to hedge their loan books.

Banks intending to use the fair-value option needed to have their

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