Market watchdogs in the European Union should allow banks to skirt fair-value accounting rules immediately to ease the pain of the financial crisis, EU Internal Market Commissioner Charlie McCreevy said today.
Fair value or mark-to-market accounting has been maligned by the financial industry for forcing banks and others to post large writedowns as markets for their mortgage-related securities dried up.
Mr McCreevy will propose the change next week for adoption by the member states. However, he wants banks to be allowed to make use of the planned reform before it becomes law.
"I would hope that national supervisors would apply these new provisions already so that banks, who wished to, could avail of this new possibility for their third-quarter results," Mr McCreevy said in a speech prepared for delivery at the European Parliament.
The change would allow banks to value illiquid assets according to the original price paid for them rather than the far lower current price, thereby taking away pressure to top up their capital requirements in a frozen money market.
Reuters