Bank Regulators Pray Accounting Will Not Expose Them as Screwed
This is just weird.
I wish I had better words for it but I'm sort of out of them at this point. I don't watch zombie movies any longer, I read CFO.com.
Will Bank Regulators Diverge from GAAP?
Bank regulators are set to discuss accounting standards next week, with an aim toward determining the potential affects that off-balance-sheet rules may have on some financial institutions. During the past year, bankers have fretted about new accounting rules that would force them to bring back on their balance sheets billions of dollars worth of assets — a move bankers have argued will throw regulatory capital ratios into chaos.
As a result, the Federal Deposit Insurance Corp., the federal agency that insures bank deposits, announced it would discuss "the impact of modifications to generally accepted accounting principles" during its August 26 board meeting. What that likely means is board members will debate the practical implications of the rules known as FAS 166 and FAS 167, which beginning in January 2010 will change the way banks and other financial institutions account for securitizations and special-purpose entities (SPEs).
The projects that eventually became FAS 166 and FAS 167 were initiated by FASB at the request of investors, the Securities and Exchange Commission, and the President's Working Group on Financial Markets. The working group was originally formed by then-President Ronald Reagan in response to the "Black Monday" stock-market crash of 1987
The impact of the accounting rules on banks came to a head in May, when the Federal Reserve Board released the results of its so-called stress tests, which were performed on the 19 largest bank holding companies in the United States. The unprecedented stress testing, officially dubbed the Supervisory Capital Assessment Program, incorporated several accounting changes into its modeling, including the potential effects of FAS 166 and FAS 167. In its summary report, the Fed concluded that the new FASB rules would require banks to reconsolidate off-balance-sheet assets tied to securitizations and SPEs.
So far, the estimates of how many billions of dollars would have to be reconsolidated vary, with the Fed guessing that an aggregate $700 billion worth of assets would be brought back on the balance sheets of the largest bank holding companies. News reports have estimated the impact to be closer to $1 trillion worth of assets.
The problem for banks is that as they consolidate the assets, they also will be required by law to increase their capital cushion, something that could prove undoable during a credit crisis.
What the fuck do you mean by "undoable"?
Even though FASB and I broke up yesterday, I don't think this is up for debate, bank regulators. You should probably stick to your side of the line and stay away from ours.
If the rules expose the banks as broke, then one can reasonably conclude that they are, in fact, broke. This isn't all that complicated, there's really no reason to hold a conference to discuss what isn't yours to dictate anyway.
Bank regulators are scrambling for a way to make it appear as though things are far better than they are. I think FASB may be back on my good side and we can go back to "It's Complicated"...
Unless they hand their balls over again.
The Fed is pretty much for it, so there must be a strategy at work.