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Marking to Market for Financial Institutions: A Common Sense Resolution

Author

Listed:
  • Franklin Allen

    (University of Pennsylvania)

  • Elena Carletti

    (European University Institute)

  • Finn Poschmann

    (C.D. Howe Institute)

Abstract

Debate has intensified in recent years on the advantages and disadvantages of moving towards a full mark-to-market accounting system for banks and insurance companies. The debate has been heated by moves by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board to harmonize accounting standards across countries. Proponents contend that mark-to-market accounting has the advantage of reflecting the relevant value of financial institution balance sheets, allowing regulators, investors and other users of accounting information to better assess their risk profile. Opponents counter that mark-to-market accounting leads to excessive and artificial volatility, especially when regulatory standards such as bank capital ratios are tied to reported accounting numbers.

Suggested Citation

  • Franklin Allen & Elena Carletti & Finn Poschmann, 2009. "Marking to Market for Financial Institutions: A Common Sense Resolution," e-briefs 73, C.D. Howe Institute.
    • Handle: RePEc:cdh:ebrief:73
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    File URL: https://www.cdhowe.org/public-policy-research/marking-market-financial-institutions-common-sense-resolution
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    Cited by:

    1. John F. Chant, 2011. "Strengthening Bank Regulation: OSFI's Contingent Capital Plan," e-briefs 116, C.D. Howe Institute.

    More about this item

    Keywords

    mark-to-market accounting; accounting standards; financial markets;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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