US banks call for more leeway on mark-to-market rules

The American Bankers Association, a lobbying group, has protested that its members need more relaxed valuation rules, blaming the Financial Accounting Standards Board for ignoring the financial crisis.

The ABA's president, Edward Yingling, complained in a letter to SEC chairman Christopher Cox that FASB "apparently still refuses to recognise the realities of the current situation".

FASB said on October 10 that banks could use other methods of valuing illiquid securities rather than relying on mark-to-market accounting - which would lead to undervaluation of troubled products.

But, Yingling said, FASB had undermined this by insisting that valuations should also include a liquidity risk premium: "This requirement brings the guidance full circle back to distressed sale values," he wrote, and called for the SEC, which has the final say over US accounting standards, to overrule FASB.

On September 30, the SEC reminded banks that existing accounting rules did not mandate the use of mark-to-market accounting in all circumstances, but it did not provide specific guidance or examples of when the principle could be abandoned.

See also: SEC to ease mark-to-market rules