WASHINGTON -- Thrifts will have to adjust their capital to reflect unrealized gains and losses on securities available for sale, under a proposal issued last week by the Office of Thrift Supervision.

Regulators are required by law to keep bank and thrift accounting standards at least as stringent as generally accepted accounting principles.

The Financial Accounting Standards Board determines GAAP, and this particular rule arises from Financial Accounting Standard 115, or FAS 115.

FAS 115, issued in May 1993, requires securities that are available for sale to be reported at current market value.

One Rule for All

The OTS proposal follows similar plans from all three banking agencies.

Comments are due at the thrift agency on July 22. Once that deadline passes, officials from all four agencies will sit down and hammer out a common rule.

All of the agencies fought FASB as it was considering FAS 115, and are now stuck writing regulations they oppose.

The proposals from all four agencies would require institutions to reflect the unrealized gains and losses on these securities in Tier I capital.

Possibly signaling a retreat, acting OTS director Jonathan Fiechter warned last week that the new rule could hurt the industry.

Offsets Not Considered

"I am concerned that FAS 115 may create incentives for banks and thrifts to take actions that are not in their best interests," he said in a statement.

The rule, he said, looks only at securities available for sale, while ignoring offsetting changes in other assets and liabilities that could have the effect of cushioning swings in market value.

The industry's major trade group, the Savings and Community Bankers of America, also criticized the proposal, but held out hope that it might be modified.

"We are very concerned about the volatility this will introduce into the balance sheet," said Marti Sworobuk, the trade group's program director for accounting and financial reporting issues.

Ms. Sworobuk said that while the 1991 Federal Deposit Insurance Corp. Improvement Act requires the OTS to act, it gives the agency flexibility to depart from the standard proposed by the Financial Accounting Standards Board.

"Our sense is that there is some flexibility," she said. The proposed rule is probably tougher than the final rule will be, she added, because "it is easier to go from a very conservative rule to a less conservative one."

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