FASB Proposes Mark-to-Market for Portfolio Loans

The Financial Accounting Standards Board wants banks and thrifts to apply fair value accounting to the multifamily and single-family loans they hold on their books. The FASB proposal would require depositories to mark-to-market the value of their loans on a quarterly basis to provide more timely information on anticipated credit losses. The American Bankers Association claims mark-to-market accounting should not be used for assets that are not traded. "If a company's business is not based on mark-to-market, then using it as a basis of accounting can be misleading to users of financial statements," ABA president and chief executive Edward Yingling said. The ABA president also noted it will reduce the availability of long-term loans and increase "pro-cyclicality" in the financial system. The comment period on the FASB exposure draft ends Sept. 30, 2010. Under the proposal, non-public lenders with less than $1 billion in assets would have four years to implement the new accounting rule.