The Impact of SFAS No. 157 on Commercial Banks

Richard Schroeder () and David Schauer ()

International Advances in Economic Research, 2010, vol. 16, issue 2, 175-189

Abstract: During 2008, U. S. banks were mired in a credit crisis. According to a group of economists and bankers, one cause of the 2008 credit crisis was an accounting rule termed mark-to-market. This rule required banks to write down large portions of their investment portfolios. The purpose of this study is to examine the impact of the mark-to-market model on a sample of banks for the first three quarters of the year 2008. Results indicated that while banks grew by 20% over time, the percentage of assets measured at fair value rose only slightly. Additionally, the results indicated that applying the mark-to-market rule did not reduce the regulatory capital position of banks. Copyright International Atlantic Economic Society 2010

Keywords: Capital adequacy; Commercial banks; Credit crisis; Mark-to-market; SFAS 157; M41 (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1007/s11294-010-9256-1

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