The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Mark-to-Market Could be Here to Stay Says SEC, While Cox Talks up Best Practices

Share article

The Securities and Exchange Commission (SEC) is likely to refine the application of mark-to-market accounting rules rather than replace them, according to recent market reports. The regulator is currently engaged in a study of the rules, which it must send to Congress by 2 January. SEC chairman Christopher Cox spoke about some of its findings at a conference this week and indicated his support for fair value accounting, stressing that regulators must develop best practice guidelines, especially for complex or illiquid instruments.

Speaking at a national conference of the American Institute of Certified Public Accountants in Washington, Cox elaborated on some preliminary findings of the SEC’s study, which is primarily aimed at discovering the impact of mark-to-market accounting on bank failures. “Financial reporting is intended to meet the needs of investors and investors have clearly indicated a view that the current concept of mark-to-market accounting increases the transparency of financial information,” he said.

The fair value rules have come under scrutiny as a result of the financial meltdown last year and lobbyists for the banking industry have been urging the SEC to allow greater flexibility in the application of the mark-to-market rule in particular.

Cox said that investments held by banks that are typically marked to market represent a minority of banks’ total investment portfolios. Rather, most institutions hold loans, which don’t typically have to be accounted for at fair value unless they are subject to impairment that is other than temporary. He explained that the SEC study has found that it is proving difficult for institutions to judge whether impairment is temporary or not and this is where additional guidance is needed. “Accounting setters could improve upon the existing security impairment models,” he added.

Related content

WEBINAR

Recorded Webinar: Last minute preparations for SFTR: What still needs to be done and are we ready?

The regulation clock is ticking. Financial firms, especially those subject to Phase I of implementation, are well aware of the impending April 2020 deadline for the Securities Financing Transactions Regulation. The question is, are they ready? Tactical, i.e painful, approaches to compliance won’t be good enough. A strategic plan of attack is necessary to combat...

BLOG

EBA Seeks to Reduce Reporting Costs for Financial Firms

The European Banking Authority (EBA) is exploring ways to streamline supervisory reporting requirements and reduce reporting costs for financial institutions, especially smaller ones, as part of its drive to create a more “proportionate” regulatory and supervisory framework. Common supervisory reporting was first introduced in the EU back in 2013, and the EBA is mandated by...

EVENT

RegTech Summit Virtual

The RegTech Summit Virtual which took place in June 2020 was a huge success with over 1,100 delegates registered. We are currently working on our plans for 2021 and we hope to be back with an in-person event. Whatever the future holds you can guarantee our 2021 event will be back with an exceptional guest speaker line up of Regtech practitioners, regulators, start-ups and solution providers to collaborate and discuss innovative and effective approaches for building a better regulatory environment. Can't wait until 2021? make sure you sign up to our RegTech Summit Virtual, November 2020. More info...

GUIDE

Best Practice Client Onboarding

Client onboarding is central to the success of banks, yet it continues to present challenges and the benefits of getting it right are difficult to achieve. The challenges arise from siloed systems, manual processes and poor entity data quality. The potential benefits of successful implementation include excellent client experience, improved client acquisition and loyalty, new business opportunities, reductions in costs, competitive advantage, and confidence in compliance.