The American Bankers Association has written to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke asking them to raise accounting issues at the upcoming G-20 meeting in Pittsburgh in order to curb efforts by standard-setters to expand mark-to-market accounting to loans and debt instruments.
In the letter, ABA president and CEO Edward Yingling claimed that the mark-to-market accounting changes proposed by the Financial Accounting Standards Board and the International Accounting Standards Board are at odds with the changes recommended by the G-20 in a statement last week.
Most experts, including banking leaders, believe that repairs are needed to the accounting model, particularly in the area of provisioning for loan losses, wrote Yingling. However, he argued that the FASB and IASB proposals go too far and would undermine the G-20s efforts to strengthen the financial system.
The FASB and the IASB are proposing to increase the use of mark-to-market measurements in accounting for loans and debt securities. The IASB is scheduled to finalize its rules by the end of 2009, and FASB is scheduled to issue final rules in the second half of 2010.
Yingling argued that an expansion of mark-to-market accounting would lead to reduced lending, changes in the product types available to customers, an increased cost of capital to the banking system, and higher cost of credit to borrowers.
We have serious concerns about the direction being taken by the accounting standard-setters, wrote Yingling. We believe that the results of their deliberations will not achieve what the G-20 had hoped to achieve and, in fact, are contrary to the G-20 recommendations.
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