FASB reverses on loan commitments

The US Financial Accounting Standards Board (FASB) has ruled that undrawn loan commitments will not be subject to derivatives accounting rules and do not have to be marked-to-market – a victory for commercial lenders.

But there may be a larger problem on the horizon for banks opposed to fair-value loan accounting. FASB, the US accounting standards-setter, also says it will add loans to its ongoing fair-value accounting project, through which it is devising mark-to-market accounting rules for all financial instruments.

FASB had ruled in December that unfunded loan commitments were essentially options on loans, and should therefore be subject to its fair-value accounting rule for derivatives, FAS 133. The

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