The Financial Accounting Standards Board’s (FASB) proposal that would mandate fair value accounting treatment for most banks is not finding any supporters in the institutional investor space, a new study claims.
In a joint-study offered by Keefe, Bruyette & Woods (KBW) and Greenwich Associates, which included responses received from roughly 62 U.S. institutional investors last month, explained that more than 66% of the pool “say they are strongly or very opposed to the proposal.” Approximately 20% are in favor of its current recommendations, an Oct. 19 release stated.
Thomas Michaud, president of KBW, explained that the heart of FASB’s mission, which is to “provide useful information to investors, and…expand fair value reporting on bank balance sheets,” is thought to be a wrong approach by investors responding to the survey.
Objections include misconceptions on reliability of mark-to-market rules will not be helpful in making investment decisions due to fair market values loans and their placement on banks’ books. Also, roughly 45% said the expansion to bank loans would “reduce their level of investment in U.S. banks.”
Due to this opposition, Stamford, Conn.-based Greenwich Associates consultant Don Raftery mandated that FASB should “rethink their approach.”
This rethinking, according to the institutional investor responses, would be to increase transparency and disclosures, however, more than 70% explained that they would back banks to include such information about fair value in 10Q and 10K filings.
Collectively, more than 40% of the investor participants had $30 billion or more in assets under management. KBW offers banking, insurance, asset management, mortgage banking, and real estate offerings to it clients through multiple locations and subsidiaries.
Also, Greenwich provides “research-based strategy management services” for finance professionals, the release said.