US raises $5,000bn balance sheet fears
Trade associations in the US have raised concerns that accounting changes could see massive amounts brought onto banks' balance sheets, making capital-raising efforts harder
Banks and other could be forced to bring up to $5,000bn (£2,500bn) onto the
books if changes to the treatment of off-balance sheet vehicles are pushed
through.
In the US, there are about $10,000bn of outstanding bonds backed by mortgages
and other debt, but half of these could come on balance sheet, much to the
concern of the Securities Industry and Financial Markets Association and the
American Securitisation Forum.
The Financial Accounting Standards Board is currently looking at the
standards governing off-balance sheet vehicles, but the two debt market trade
bodies urged standard setters not to be too hasty in making changes.
SIFMA and the ASF wrote to FASB because they were concerned that there could
be ‘serious unintended consequences,’ the
FT
reported.
‘In particular, we do not believe that a year-end 2008 deadline is a
necessary response to current market conditions. The risk of too much haste are
high.’
Further reading:
Off
balance sheet structures too risky