NEW ORLEANS - The group that sets accounting standards has no plans to force financial institutions to mark their loans and nonsecurities investments to market value, bankers were assured at a convention here.
Dennis R. Beresford, chairman of the Financial Accounting Standards Board, told banks and thrifts that the standards board has no plan to "move toward full market-value accounting."
Mr. Beresford, who spoke to reporters at the annual convention of the Savings and Community Bankers of America last Wednesday, said many bankers have not spoken out in favor of marking some liabilities to market issues because they feared it might be a step toward comprehensive market value accounting.
These bankers complain that it makes little sense to mark just one side of the balance sheet to market, and have said that if some portfolio securities are treated at market value, then some liabilities should also be counted that way.
'Share the Facts'
Mr. Beresford invited bankers to "Share facts with us, and not just fight us on the issue."
FAS 115, the rule requiring financial institutions to account for securities that are available for sale at market value, goes into effect in the first quarter for companies whose fiscal years begin after Dec. 15.
Until then, institutions can account for the assets at cost.
Generally, loans and securities held for investment will continue to be counted at cost.
Report Due in December
Mr. Beresford said the standards board staff in mid-December will report to the board on whether it should add rules requiring companies to mark some liabilities to market.
"If we decide to take up the liability issue," Mr. Beresford said, the board will "keep it fairly short term."
Even if the project's scope is limited, "It would be almost a miracle if we could get it done by the end of 1994," he said. It is possible the board will not take up the issue because it is working on other, more pressing questions, he said.
'A Loaded Gun'
John E. Brubaker, president and chief executive of San Mateo, Calif-based Bay View Federal Bank, said FAS 115 is likely to force the industry to place too many of its assets in the "available for sale" category, which in an economic downturn could put the institutions in danger of failing by showing up as huge paper losses on their balance sheets and perhaps force many institutions out of capital compliance.
"I am not sure that the accounting industry hasn't handed us a loaded gun," Mr. Brubaker said.
Mr. Beresford said the board considered that prospect. "That is really the debate that we went through leading up to 115."
To address the problem, he said the board decided to set up separate accounting categories - such as "held to maturity" and "available for sale" - for different types of assets, depending on what the bank or thrift planned to do with them.
"We think it is appropriate for those who simply can't express an explicit view about what their intentions are" about certain assets to count them under market value accounting, Mr. Beresford said.
When the board was considering requiring companies to mark their assets to market, "Most if not all board members felt that we should include liabilities," Mr. Beresford said.
But the board dropped that aspect from FAS 115 because it could not resolve the question of which liabilities should be marked to market.