About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

American Bankers Association and SEC Discuss Fair Value Accounting

Subscribe to our newsletter

The American Bankers Association (ABA) is currently engaged in discussions with the Securities and Exchange Commission (SEC) regarding fair value accounting under the current market conditions. The two bodies are conducting the talks during two scheduled roundtable discussions this week.

Aubrey Patterson and Randy Ferrell, both representatives from the ABA, have voiced concerns over the relevance and reliability of fair value accounting. “If an entity’s business model is based on fair value, then fair value may well be the most relevant measurement,” says Patterson, who is a former chairman of the ABA and currently serves as CEO of BancorpSouth. “However, if the business model is not based on fair value, then using it as the basis of accounting can be misleading to users of financial statements.”

Ferrell, who is president and CEO of Fauquier Bankshares, adds: “The business model of most community banks is not based on fair value; instead, our business models are typically traditional commercial and retail banking – designed to fit the needs of our customers. Community bankers are very concerned about the complexity of fair value and about moving any further toward full fair value for all financial instruments.”

Patterson highlights the current market turmoil as an example of why fair value should not be the accounting model for all financial instruments. “The lack of typical buyers and sellers in the market indicates that the sellers believe their values are greater than the values the buyers are willing to pay. Yet, in some cases, those low ‘exit’ prices are being required for use in financial statements, resulting in distressed sale valuations,” says Patterson, who is also concerned about the impact of fair value on business combinations.

“The requirement to use fair value for business combinations (SFAS 141R) is having the effect of preventing mergers and acquisitions from occurring,” adds Patterson.

Patterson believes the SEC should resolve questions about whether “other than temporary impairment” should be recognised for financial instruments that are current, are not in default and are not expected to be in default. “The rules for OTTI must be examined with a fresh look, particularly for instruments that do not have identified credit problems,” she adds.

Subscribe to our newsletter

Related content

WEBINAR

Upcoming Webinar: Hearing from the Experts: AI Governance Best Practices

9 September 2025 10:00am ET | 3:00pm London | 4:00pm CET Duration: 50 Minutes The rapid spread of artificial intelligence in the financial industry presents data teams with novel challenges. AI’s ability to harvest and utilize vast amounts of data has raised concerns about the privacy and security of sensitive proprietary data and the ethical...

BLOG

Bloomberg Enhances Credit Risk Signalling Tools That Forecast the Barbie Party

Barbie and her pals no doubt threw a huge party when the company that makes the iconic doll, Mattel, saw its debt upgraded from junk to investment grade by the three major credit rating firms earlier this year. Had they spoken with some market watchers, however, the Barbieland party could have started months – maybe...

EVENT

Future of Capital Markets Tech Summit: Buy AND Build, London

Buy AND Build: The Future of Capital Markets Technology London on September 19th at Marriott Hotel Canary Wharf London examines the latest changes and innovations in trading technology and explores how technology is being deployed to create an edge in sell side and buy side capital markets financial institutions.

GUIDE

Enterprise Data Management, 2010 Edition

The global regulatory community has become increasingly aware of the data management challenge within financial institutions, as it struggles with its own challenge of better tracking systemic risk across financial markets. The US regulator in particular is seemingly keen to kick off a standardisation process and also wants the regulatory community to begin collecting additional...