The board that sets U.S. accounting standards is giving companies more leeway when valuing assets, providing a potential boost to battered banks’ and insurers’ balance sheets.
Stocks of most banks with headquarters or branches in Connecticut climbed this morning after the independent Financial Accounting Standards Board voted to adopt new guidelines under the so-called mark-to-market accounting rules, which require companies to value assets at prices reflecting current market conditions.
Hartford banker David Lentini, who is chairman and CEO of Connecticut Bank and Trust Co. and a director of the Federal Reserve Bank of Boston, said that, in addition to boosting lenders’ profitability, the relaxed accounting standard could help loosen credit.
“This is a tremendously positive change,” Lentini said. “It’s always been everybody’s desire … that there should be fair reporting of what assets are valued at.”
The FASB changes will allow the assets to be valued at what they would go for in an “orderly” sale, as opposed to a forced or distressed sale. The new guidelines will apply to the second quarter that began this month.
The mark-to-market rules have forced banks to take steep write-downs on some assets, especially securities tied to high-risk subprime mortgages. (AP)
