|
|
|
|
|
Federal Legislative and Regulatory Issues
|
Real-Estate Related Mark to Market/Fair Value Accounting
Certain accounting
standards, primarily FAS 157, create unnecessary write downs of a bank’s
securities portfolio in a troubled market. We are appreciative of the
helpful adjustments recently adopted related to how banks are allowed to
value these securities. However, the actions taken to date do not
address fair value treatment of real estate, which is the critical issue
for most Georgia banks. The accounting guidelines, primarily FAS 114 and
FAS 5, need to be reviewed. However, bank regulators seem to be taking
more aggressive positions than the guidelines require. For example,
banks are being pressured to sell foreclosed real estate faster than
five years; the “look back” period for estimating losses has shrunk to
months instead of years; the absorption rates for developed lots has
been extended to as much as 15 years by some examiners; and banks are
being forced to take write downs of specific loans and then replenish
their loan loss reserve for that exact amount even though guidelines
seem to suggest otherwise. These and many other recent changes in
regulatory policy are having a serious and detrimental effect on bank
capital. In essence, bankers are being required to use real capital to
account for theoretical losses. |
GBA's professional staff represents the membership at the both the state and federal levels. Contact any of them with questions about issues:
Joe Brannen |
