New accounting standard will force banks to 'come clean' on sub-prime mortgages
Accountancy Age, 12 Nov 2007
Fair value accounting is set to trigger a series of write-downs of up to £190bn on Wall Street this week.
US accounting standard FAS 157 is set to prohibit banks such as Citigroup, Goldman Sachs, Morgan Stanley and others from setting values to sub-prime mortgages and other forms of debt on the basis of 'assumptions', the Daily Telegraph reported.
Assets must instead be valued at market prices.
Barclays share price dropped 9% at one point in the run-up to Friday's trading, causing trading to be suspended. The bank denied reports that it was preparing to write $10bn in sub-prime investments.
Royal Bank of Scotland credit chief Bob Janjuah said the standard could lead to a further $100bn for write-downs as banks are forced to come clean, with total losses climbing as high as $500bn across all forms of distressed credit.
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