ABA calls for action on mark-to-market accounting

Banking association asks US treasury for immediate action on mark-to-market accounting issues

WASHINGTON, DC - The American Bankers Association (ABA) has called on US regulators for immediate action to counter the pro-cylical effects of mark-to-market accounting before financial institutions file their year-end results.

The letter, sent simultaneously to the Securities and Exchange Commission, the Federal Reserve, current Treasury secretary Henry Paulson and incoming Treasury secretary Timothy Geithner, and Democrat and Republican leaders of the House Financial Services Committee and the Senate Banking Committee, was in response to comments made by Paulson during a speech he delivered on November 20. Speaking at the Reagan Library in California, Paulson said it was important to address the aspects of the US financial system that reinforce rather than counterbalance cycles. He also stated "mark-to-market accounting is clearly pro-cyclical".

In the letter, ABA president and chief executive Edward Yingling strongly agreed with Paulson's assessment of mark-to-market accounting, stating the past year "has demonstrated that the consequences of these pro-cyclical accounting standards are grave".

Yingling further noted that, because banks will be required to file their year-end financial statements in a few weeks, the time to address the failures of accounting policy is now, as delay threatens to undo much of the work of Treasury's Capital Purchase Programme.

"While the government makes millions of dollars available to increase capital, other policies simultaneously are needlessly, and wrongly, erasing billions of dollars of banks' capital," said Yingling."

The ABA also suggested three things the SEC could do in the near term to help alleviate concerns. These are: to clarify that the accounting rules for other than temporary impairment are based on credit impairment; clarify that the definition of fair value is based on willing buyer/willing seller rather than exit price; and delay the implementation date for the new business combinations rules, which affect mergers and acquisitions.

Click here to view a copy of the full letter.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Financial crime and compliance50 2024

The detailed analysis for the Financial crime and compliance50 considers firms’ technological advances and strategic direction to provide a complete view of how market leaders are driving transformation in this sector

Investment banks: the future of risk control

This Risk.net survey report explores the current state of risk controls in investment banks, the challenges of effective engagement across the three lines of defence, and the opportunity to develop a more dynamic approach to first-line risk control

Op risk outlook 2022: the legal perspective

Christoph Kurth, partner of the global financial institutions leadership team at Baker McKenzie, discusses the key themes emerging from Risk.net’s Top 10 op risks 2022 survey and how financial firms can better manage and mitigate the impact of…

Emerging trends in op risk

Karen Man, partner and member of the global financial institutions leadership team at Baker McKenzie, discusses emerging op risks in the wake of the Covid‑19 pandemic, a rise in cyber attacks, concerns around conduct and culture, and the complexities of…

Moving targets: the new rules of conduct risk

How are capital markets firms adapting their approaches to monitoring and managing conduct risk following the Covid‑19 pandemic? In a Risk.net webinar in association with NICE Actimize, the panel discusses changing regulatory requirements, the essentials…

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here