Comments on: A reminder about new mark-to-market rules in Europe http://www.creditwritedowns.com/2009/02/a-reminder-about-new-mark-to-market-rules-in-europe.html Finance, Economics and Markets Fri, 10 Feb 2012 00:37:00 +0000 hourly 1 By: Edward Harrison http://www.creditwritedowns.com/2009/02/a-reminder-about-new-mark-to-market-rules-in-europe.html#comment-3947 Edward Harrison Tue, 17 Feb 2009 23:08:27 +0000 http://www.creditwritedowns.com/?p=6092#comment-3947 @John, Below is a link to a good analysis on mark-to-market versus accrual accounting. The whole process is subject to interpretation, meaning it can be abused. Goldman advocates MTM accounting whereas Citigroup is saying the marks are too low due o pro-cyclicality. In my view, this is an issue that will grow in importance as time goes on. http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/02/guest-post-mark-to-market.html @John,

Below is a link to a good analysis on mark-to-market versus accrual accounting. The whole process is subject to interpretation, meaning it can be abused. Goldman advocates MTM accounting whereas Citigroup is saying the marks are too low due o pro-cyclicality.

In my view, this is an issue that will grow in importance as time goes on.

http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/02/guest-post-mark-to-market.html

]]> By: John Creighton http://www.creditwritedowns.com/2009/02/a-reminder-about-new-mark-to-market-rules-in-europe.html#comment-3939 John Creighton Tue, 17 Feb 2009 20:13:51 +0000 http://www.creditwritedowns.com/?p=6092#comment-3939 I’m curious as to how they determine the held to maturity value. For instance what do they assume for the: default risk, recovery risk and expected rate or return. If they hold them to maturity they would have to make some kind of assumption about the time value of money. To me it seems as what this does is changes the capital requirements from the current capital value to projected future capital value. It doesn’t sound like a bad idea in theory but I think it would make it harder for people to evaluate the finical statements of banks. I wonder what percentage of the capital the banks are allowed to put in this category. To me I’d think the further out the maturity date the less they should be able to count. I’m curious as to how they determine the held to maturity value. For instance what do they assume for the: default risk, recovery risk and expected rate or return. If they hold them to maturity they would have to make some kind of assumption about the time value of money. To me it seems as what this does is changes the capital requirements from the current capital value to projected future capital value.

It doesn’t sound like a bad idea in theory but I think it would make it harder for people to evaluate the finical statements of banks. I wonder what percentage of the capital the banks are allowed to put in this category. To me I’d think the further out the maturity date the less they should be able to count.

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