Accounting relief hope may limit toxic asset sales

NEW YORK, March 27 Fri Mar 27, 2009 12:34pm EDT

NEW YORK, March 27 (Reuters) - Banks and insurance companies may hold off selling troubled assets into the U.S. Treasury public-private funds on expectations they will get relief from changes in accounting rules, according to Amherst Securities Group.

Proposed changes to rules that require assets be revalued each quarter would allow market-related losses to be recorded separately from credit losses, the analysts said. That means write downs could be significantly less for banks, on assets that are not likely to be sold before its value recovers.

"Banks and insurance companies have every incentive to hold their securities and wait for accounting relief," the analysts, led by Laurie Goodman, said in a note dated March 26.

The Financial Accounting Standards Board will hold a meeting on its proposals on Thursday.

Even without consideration to accounting rule changes, banks have no incentive to sell into the government program unless its securities have already been written down, the analysts said.

(Reporting by Al Yoon, Editing by Chizu Nomiyama)

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