Europe Updating Mark-to-Market Rules

The EU is once again looking for ways to not only deal with the results of the financial crisis, but also some of the potential root causes of the problems (see Financial Times article). EU regulators in Brussels voted to accept changes made by the International Accounting Standards Board that will give banks more leeway in how they value certain assets whose value has dropped excessively. The changes can be applied to third quarter results, and essentially allow banks and institutions to move assets from their trading books to their banking books. This change will allow the assets to be reported at "amortized" cost, spreading cost over a number of years, as opposed to "fair" market value, which in some cases is too low or simply unknown.