NEWS RELEASE
April 10, 2009
ABA Media Contact: Jonathan Snowling
(202) 663-5468
E-mail: jsnowlin@aba.com

ABA NOTES FASB STAFF POSITIONS (FSPs) ON MARK-TO-MARKET
ACCOUNTING AND IMPAIRMENT RULES
Step in the right direction but still more work to be done

by Edward L. Yingling, ABA president and CEO

            "The American Bankers Association welcomes the Financial Accounting Standards Board's new guidance on mark-to-market accounting and impairment rules. We have worked for over a year to educate policymakers and stakeholders about the destructive effects of mark-to-market accounting for banks.

            "ABA recognizes the improvements made regarding accounting for debt securities that are impaired. Under this new guidance, impairment reflected in earnings will be more closely linked with actual credit losses rather than market losses.  This will help provide a more realistic picture of losses.

            "Although the FASB's clarifications on estimating market values in illiquid markets should help improve consistency in the application of the existing rules, we continue to believe that the rules are resulting in downward biases in market values.

            "The new FSPs represent a step in the right direction, but we need to make greater use of economic values rather than market values. It is our hope that FASB will work expeditiously in the coming months to more fully address the lack of relevance and reliability of mark-to-market accounting for traditional banking activities.

            "We have long argued that fair value accounting should only be used where it is relevant to the business model, such as businesses that are based on short-term trading activity.  Traditional banking typically involves accepting deposits and making loans rather than active buying and selling.  For the activities that are the bread and butter of the banking industry, mark-to-market simply does not fit the business model." 

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The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America's economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry's $13.6 trillion in assets and employ over 2 million men and women.