Mark to Market rules: Accounting hell?

9
feb

Mark to Market rules: Accounting hell?

Escrito el 9 febrero 2009 por Antonio Rivela Rodríguez en Uncategorized

I doubt therefore I exist.

Every now and then it is convenient to revisit topics that are considered a given: And having to value at market price all bank assets and liabilities is surely a controversial one.

Several banks have been complaining about mark to market rules.

They claim that by having to reflect the market value on their subprime securities, they became forced sellers, i.e, all market participants knew that they were loaded of toxic mortgage backed securities and just waited like a lion does for a prey in the sabanna.

A lion knows that sooner rather than later, the prey will get tired… by the same token most hedge funds knew banks would have to sell… at the end.

As you can see, Goldman Sachs CEO is keen on mark to market rules.

See Bloomberg link below.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aG3yyG.gDkRM&refer=home

Comentarios

budi 19 febrero 2009 - 13:11

i agree with that

Andres P 26 febrero 2009 - 23:41

Great topic.

In the current liquidity crisis ,given the lack of market prices, we were obligated to rely on broad based estimates via mark-to-model accounting in order to determine values for bonds. As expected, prices did not look any better, in fact given the assumptions used in the model, the prices decreased almost exponentially; got to the point where we were forced to take impairment losses almost everyday. In the meantime, other investors with similar bonds just stopped doing a MTM of their portfolios as the whole MTM concept was not forced on other local banks in the country.

I totally agree with keeping MTM policies, however I think there should be a clear and harmonized methodology across ALL financial institutions that should be implemented and monitored by regulators in order to “reduce risk relatively early” and prevent another crisis.

Before regulators find a “solution, my question is do you think we need a time-out from MTM until the markets “normalize”?

Mike 31 enero 2010 - 16:04