WASHINGTON - Banks should not use the new mark-to-market accounting rule to compute Tier 1 capital on first-quarter call reports, federal regulators said this week.
In accordance with Financial Accounting Standard 115, the agencies are proposing to change Tier 1 capital to include any unrealized gain or loss on securities available for sale.
With interest rates so low right now, the coming change is expected to boost Tier 1 capital at most banks.
But the regulators have not officially adopted the change yet, so they do not want banks taking advantage of the new accounting rule.
The Accounting Standard
FAS 115 requires a bank to incorporate into shareholders' equity unrealized gains and losses on securities it categorizes as "available for sale."
Regulators said last August that banks would be expected to adopt FAS 115 in their first-quarter call reports. That is still the case; however, the results will not be incorporated into Tier 1 capital until later.
