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

Goldman’s Blankfein Praises Mark to Market Accounting as Early Warning Signal

Subscribe to our newsletter

Despite the market’s apparent aversion to mark to market accounting, Lloyd Blankfein, CEO of Goldman Sachs, this week spoke about the benefits of the rules, which he said could have provided an “early warning” of the financial crisis. Speaking at the annual International Organisation of Securities Commissions (IOSCO) conference in Tel Aviv, Blankfein said the practice of marking to market, or reporting assets at their current market value, meant that institutions were forced to face up to their losses.

“Had fair market been implemented more widely then people would have had an early warning and seen value erode,” he told delegates. “It’s painful to mark these things down, but it’s more painful to have to mark them down beyond the point where you can no longer afford the capital.”

Blankfein indicated that he is keen for more items to be included visibly on balance sheets to more accurately reflect the position of financial institutions and their assets. His comments were echoed by Mario Draghi, chairman of the Financial Stability Board (FSB), who contended that off balance sheet accounting rules were one of the main underlying causes of the financial crisis.

Draghi is critical of the “We don’t want to go back to what it was before,” he said. “There is a balance to be drawn as to how far regulation can go and how far we can trust the market.”

Blankfein’s comments are surprising given the market’s perceived stance on fair value accounting. The International Accounting Standards Board (IASB) and the US focused Financial Accounting Standards Board (FASB) have both recently been coerced by lobbyists to soften the mark to market rules to allow firms “significant judgement” in the valuation of their assets.

In April, the FASB was forced to revise its mark to market legislation following pressure from lobbying efforts by the US Chamber of Commerce, the American Bankers Association (ABA) and the country’s larger financial institutions. Moreover, on 12 March, the FASB was threatened with government action if it did not take action during a hearing of a House Financial Services subcommittee. Government officials told Robert Herz, chairman of the FASB, to get the rule changes implemented in a period of three weeks or face regulatory intervention.

In May, the IASB faced similar pressure when European Union finance ministers kicked up a fuss about the disparity between accounting standards in the region and the now more relaxed rules in the US. As a result, it was forced to expedite its decision making process on the subject in order to appease political lobbyists. The IASB had originally planned a revision of IAS39 to be published in October, but was forced to promise a draft of the revisions for July.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: How to optimise SaaS data management solutions

Software-as-a-Service (SaaS) data management solutions go hand-in-hand with cloud technology, delivering not only SaaS benefits of agility, a reduced on-premise footprint and access to third-party expertise, but also the fast data delivery, productivity and efficiency gains provided by the cloud. This webinar will focus on the essentials of SaaS data management, including practical guidance on...

BLOG

Singapore-Based GRC Solutions Provider Xcelerate Secures Funding for Acquisitive Growth

Xcelerate, a Singapore-headquartered provider of governance, risk and compliance (GRC) solutions to industry sectors including capital markets, has secured an equity funding round with participation from funds managed by Altair Capital and Exacta Capital Partners. Co-founders, management and select existing shareholders of Xcelerate also participated in the funding, which will be used to finance acquisitions...

EVENT

Data Management Summit New York City

Now in its 14th year the Data Management Summit NYC brings together the North American data management community to explore how data strategy is evolving to drive business outcomes and speed to market in changing times.

GUIDE

Regulatory Data Handbook – Second Edition

Need to know all the essentials about the regulations impacting data management? A-Team’s Regulatory Data Handbook is a great way to see at-a-glance: All the regulations that are impacting data management today A description of each regulation The impact each will have from a data and data management perspective Messages from sponsors with products related to...