Oh, brother. Leave it to accounting-rule fusspots to take a tricky situation and try to make it worse.
“SILICON VALLEY BANK LOSSES EMBOLDEN
CALL FOR U.S. ACCOUNTING RULE REFORM
“U.S. accounting rulemakers are being urged to rethink how banks should value their assets in financial statements, in the wake of the run on Silicon Valley Bank and pressure across the regional banking sector.
“Advocates of ‘fair value’ accounting are urging the Financial Accounting Standards Board to force banks to recognise unrealised losses on securities such as those held by SVB, even when management insists they will never have to be sold.
“A fair value approach would have made SVB’s losses on its bond portfolio obvious to more investors earlier, the advocates say, and could have forced the bank to take action to shore up its finances before it was too late.” [Emphasis added.]
Sure, why not? I mean, mark-to-market accounting was so helpful in ending the 2008 financial crackup, remember? Oh, wait. I have no problem with banks disclosing the market value of their HTM assets—which they’re already required to do. But actually running the changes in value through the bank’s P&L? That’s a recipe for disaster. You’d think people would have figured that out by now.
Mark-to-market accounting again? No thanks.
By Thomas K. Brown,
Oh, brother. Leave it to accounting-rule fusspots to take a tricky situation and try to make it worse.
“SILICON VALLEY BANK LOSSES EMBOLDEN
CALL FOR U.S. ACCOUNTING RULE REFORM
“U.S. accounting rulemakers are being urged to rethink how banks should value their assets in financial statements, in the wake of the run on Silicon Valley Bank and pressure across the regional banking sector.
“Advocates of ‘fair value’ accounting are urging the Financial Accounting Standards Board to force banks to recognise unrealised losses on securities such as those held by SVB, even when management insists they will never have to be sold.
“A fair value approach would have made SVB’s losses on its bond portfolio obvious to more investors earlier, the advocates say, and could have forced the bank to take action to shore up its finances before it was too late.” [Emphasis added.]
Sure, why not? I mean, mark-to-market accounting was so helpful in ending the 2008 financial crackup, remember? Oh, wait. I have no problem with banks disclosing the market value of their HTM assets—which they’re already required to do. But actually running the changes in value through the bank’s P&L? That’s a recipe for disaster. You’d think people would have figured that out by now.