ETF News

UPDATE 2-US Congress to examine mark-to-market accounting-source

* Congressional panel plans hearing, tentatively March 12

* Guidance urged on audit reviews of mark-to-market

(Adds share impact, detail on House panel plan, industry letter to PCAOB)

WASHINGTON, March 4 (Reuters) - A U.S. House financial services subcommittee plans a hearing on mark-to-market accounting rules, which have been blamed for forcing banks to report billions of dollars in write-downs, a source briefed on the matter told Reuters on Wednesday.

The subcommittee on capital markets has tentatively scheduled the hearing for March 12, the source said.

The U.S. Securities and Exchange Commission’s chief accountant and the chairman of the Financial Accounting Standards Board, will be asked to testify, the source said.

U.S. industry groups have urged the SEC and FASB to significantly alter or suspend the accounting rule, saying it is is undermining the government’s multibillion-dollar effort to stabilize the financial sector.

Mark-to-market accounting requires assets to be valued at current market prices. Some banks say it forces them to mark down assets to artificially low prices in the current financial crisis, even when banks intend to hold the assets past the current reporting period.

Shares of banks, such as Bank of America BAC.N and Wells Fargo WFC.N, rose after Reuters reported the plans for the mark-to-market hearing, underscoring the sensitivity of the issue for financial companies.

Last year, the SEC and FASB clarified how to value assets in illiquid markets. The SEC gave the financial industry a reprieve from marking hard-to-value assets down to fire sale prices.

The SEC and FASB have said they are working on more guidance to help banks determine the value of an asset when there is little or no market trading.

The House Financial Services Committee’s oversight plan includes reviewing mark-to-market rules and considering whether there is a need for new and additional changes to the standard.

The committee also plans to consider whether alternatives exist to pricing distressed assets in inactive markets, such as separating liquidity and credit risk.


Separately on Wednesday, U.S. business groups and a number of federal home loan banks urged the country’s audit watchdog, the Public Company Accounting Oversight Board, to issue guidance and standards on how it will inspect audits of mark-to-market accounting in light of the steps already taken by the SEC and FASB.

“It is important that guidance for auditors keep pace with the actions by the SEC and FASB,” said the letter.

The industry groups, including the U.S. Chamber of Commerce, said the watchdog’s guidance would ensure the transparency needed for investors and businesses and the “use of sound judgment by preparers in these difficult times.”

The letter dated March 4 was also signed by the American Council of Life Insurers, the Mortgage Bankers Association, the Financial Services Roundtable, the American Bankers Association, the National Association of Home Builders, the Property Casualty Insurers, the Real Estate Roundtable, the Financial Services Forum, the Council of Federal Home Loan Banks, the Federal Home Loan Banks of Chicago, Atlanta, Indianapolis, Seattle and Des Moines.

A PCAOB spokeswoman said the board had not yet received the letter. (Reporting by Rachelle Younglai; editing by Carol Bishopric and Tim Dobbyn)