* Investors need unbiased, transparent financial info
* AIG lobbied Congress to ease fair value rules
* Decoupling accounting rules, bank cap standards needed
(Recasts; adds comments on AIG, off-balance sheet rules)
By Rachelle Younglai
WASHINGTON, June 26 (Reuters) - The top U.S. accounting
rulemaker denounced the "politicization" of accounting
standards on Friday, three months after he was pressured by
Congress to make changes that would help banks' results.
Financial Accounting Standards Board Chairman Robert Herz
said lobbying by special interests undermines public confidence
in the integrity of financial reporting.
"The investing public expects and deserves unbiased and
transparent financial information that is not skewed to favor
particular transactions, companies or industries," Herz said
during an appearance at the National Press Club.
FASB was pressured earlier this year by Congress and the
banking industry to modify the controversial mark-to-market
accounting standard, which forced banks to record billions of
dollars in write-downs.
Herz did not speak specifically about those congressional
efforts, pressure that included a threat of legislation to
change the rule.
Early in April, FASB relaxed the mark-to-market rules,
which require assets to be valued at what they would fetch in a
current market transaction. It also issued guidance that would
let lenders take smaller losses on impaired assets such as
mortgage-backed securities.
Herz said some major companies, including federal bailout
recipient American International Group Inc (AIG.N), had sought
political intervention into accounting standards.
"While that is their right... politicization of accounting
standard setting by special interest risks undermining public
confidence," he said.
Herz said about a year ago, AIG's then-Chief Executive
Martin Sullivan spent time in Washington trying to convince
lawmakers there were no problems with the insurer's credit
default swaps and that it was "all this bogus fair value
(mark-to-market) accounting."
The federal government has since used billions of dollars
in taxpayer funds to prop up AIG, which nearly collapsed
because of its exposure to credit default swaps.
Now business groups are eyeing another set of FASB rules
that could could force banks to move more off-balance sheet
assets onto their books when they take effect in 2010.
Asked if he expected another effort to get FASB to soften
its stance, Herz reiterated that the new off-balance sheet
rules "become final next year."
BANK REGULATION, ACCOUNTING
In his remarks, Herz also made a case for a greater
decoupling of accounting standards and how bank regulators
determine how much capital banks must hold.
Bank regulators and accounting rulemakers have different
missions and thus have different perspectives on accounting for
financial institutions, he said.
The primary mission of bank regulators is to focus on the
safety and soundness of a financial institution, protect
customer deposits and the overall stability of the financial
system. Accounting rulemakers set standards so that financial
information on companies' performance is communicated clearly
to investors and capital markets.
"In some cases, a single accounting or reporting treatment
may not properly achieve the objectives of both the regulators
and reporting to investors and the capital markets," Herz
said.
RELATED NEWS:
* FASB eases mark-to-market's bite [ID:nL390896]
* U.S. Fed uneasy with balance sheet rules [ID:nN05290560]
* Fed eyes capital standards [ID:nN1291246]
* TAKE A LOOK-Changes in financial regulation [ID:nFINREG]
* Washington regulatory news [WASH-REG-BNK-LEN-RTRS)
(Reporting by Rachelle Younglai; Editing by Tim Dobbyn and
Gerald E. McCormick)
