Japan eases fair value rules

Shoichi Nakagawa, Japan’s finance minister, said yesterday, the government
would ease the controversial fair value rules which were forcing banks to write
down the value of their illiquid securities.

He said the government would follow recommendations issued by the Accounting
Standards Board of Japan (ASBJ). ‘As the financial services agency we will
respect this result and conduct financial supervision accordingly,’ Nakagawa

The ASBJ’s recommendation stops short of emergency suspension of fair value
accounting, something bankers like Masamoto Yashiro,
Shinsei Bank
president, has been pushing for, and most securitised debt holdings would still
be accounted for at market price even under the revised rules, the
Financial Times reports.

A halt to fair value rules is supported by several Japanese banks, but has
been one of the most controversial proposals, reminiscent of the Japanese banks
’ refusal to admit the extent of their non-performing loans during the 1990s.

Further reading:

MPs to grill Tweedie on fair value

Watchdog set to open mark-to-market probes

the Financial Times story

Related reading

Fiona Westwood of Smith and Williamson.