Marking to Market for Financial Institutions: A Common Sense Resolution

Franklin Allen, Elena Carletti () and Finn Poschmann
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Finn Poschmann: C.D. Howe Institute

No 73, e-briefs from C.D. Howe Institute

Abstract: Debate has intensified in recent years on the advantages and disadvantages of moving towards a full mark-to-market accounting system for banks and insurance companies. The debate has been heated by moves by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board to harmonize accounting standards across countries. Proponents contend that mark-to-market accounting has the advantage of reflecting the relevant value of financial institution balance sheets, allowing regulators, investors and other users of accounting information to better assess their risk profile. Opponents counter that mark-to-market accounting leads to excessive and artificial volatility, especially when regulatory standards such as bank capital ratios are tied to reported accounting numbers.

Keywords: mark-to-market accounting; accounting standards; financial markets (search for similar items in EconPapers)
JEL-codes: E44 O16 (search for similar items in EconPapers)
Pages: 5 pages
Date: 2009-02
New Economics Papers: this item is included in nep-acc, nep-reg and nep-rmg
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published on the C.D. Howe Institute website, February 2009

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