New US accounting standards for bank assets could prove an ‘historic
regulatory blunder,’ Lord Rees-Mogg has warned.
The former editor of The Times warns in
column today that US standards FAS 157 and FAS 159 will see US banks
accounting for sub-prime related derivatives under new rules.
The set-up splits assets into three categories according to the liquidity of
the markets they are traded in, with sub-prime related derivatives recorded
under ‘level three’.
Lord Rees-Mogg argues that the rules could not have come at a worse time,
when banks are moving towards cash and away from illiquid assets.
‘It is far too late to cancel FAS 157 and 159, even if that were desirable.
The concept of different levels for bank assets has been introduced to the
banking system and the defaults on sub-prime mortgages have lowered the
acceptability of all level-three assets. Noone knows what they are worth and
hardly anyone wants them.’
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