NEW YORK Goldman Sachs Group Inc. has asked accounting rulemakers make it harder for banks to use low-cost loans to muscle in on investment-banking business.
Goldman says banks use low-margin credit lines as an incentive to win underwriting and other fee-based businesses from securities firms.
In two letters to the Financial Accounting Standards Board, Sarah Smith, Goldman Sachs co-controller, said banks should be required to value credit lines on the basis of market prices, rather than being allowed to carry them as assets at full value.
Securities firms such as Goldman Sachs, which must value lending commitments at market prices, want the banks exposed to the same potential losses from declines in loan prices. Such losses have mounted as the secondary market for U.S. loans has quintupled since 1994.
As part of a review that will soon require banks to use market prices to value derivatives, the FASB staff recommended in December that no change be made to the way banks account for loans. The board, which sets accounting standards for U.S. companies, is slated to meet in June to discuss the issue.