WASHINGTON -- Many banks are at a standstill as the Jan. 1 deadline for policy implementation of Federal, Accounting Standard 115 approaches, say industry experts.

The accounting rule requires banks to report the market value of securities that are not in a trading account and will not be held to maturity,. Although the rule does not affect income, it does affect capital.

'Uncharted Water'

Many bankers say the rule forces institutions to put their capital at undue risk. For this reason, they haven't been able to decide which securities should be marked to market.

Joseph A. Longino, managing director of Sandler O'Neill & Partners, an investment banking firm in New York, said that banks are having a difficult time putting a policy in place because the rule requires a permanent securities commitment in the face of a constantly changing economy.

Mr. Longino also said banks are struggling with the rule because there's never before been anything like it. "We're in totally uncharted water here," he said.

Because the process of classifying securities for most banks cannot be completed in less than six weeks and must be approved by the institution's board of directors, Mr. Longino said many banks are looking at stiff penalties.

Long-Term Commitment

Donna Fisher, manager of accounting policy at the American Bankers Association, agreed that many banks haven't made decisions on the rule yet. Ms. Fisher said that she has not come across a bank that agrees with the rule, much less feels comfortable with it.

"It's such a permanent decision." said Ms. Fisher. She said it is unusual for banks to have to follow an accounting principle that involves a judgment they will have to stick with until the securities mature. "It's a little bit like being hog-tied."

She said she expects regulators to be tough on this issue, and that they will pay close attention to portfolio classification.

Closed a Debate

Mr. Longino said the genesis of the rule brought about one positive result - the end of a debate between the Securities and Exchange Commission and the federal banking agencies ever generally accepted accounting principles. He said it declared the SEC the winner over how accounting principles should be defined. The definition is like an old-fashioned marriage, said Mr. Longino, with no annulments, separations. or divorces.

Making a Game Plan

Ms. Fisher advised banks to "back into the decision" of how to implement the rule. She said the institution should look at its capital position and decide how much capital fluctuation it is willing to risk.

Setting up a business plan and figuring out how to manage a balance sheet are the first steps, Mr. Longino advised. The most important thing, he said, is creating a game plan. That done. he suggested banks take three more steps to make the implementation less painful:

* Review policies and procedures for securities activities regarding the rule. These must be state-of-the-art, he said, to avoid examiner criticism.

"Senior management needs to run with the ball on this one," said Mr. Longino. But, he added, everyone at the bank needs to be comfortable with it.

* Review securities portfolios to determine whether any investment securities should be re-designated to the held-for-sale or available-for-sale portfolio. The board should be involved here, he said.

* Invest excess liquidity "as profitably and prudently as possible" to build capital.

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