Bankers lobbied hard for relief they won from fair-value accounting rules, but few may capitalize on changes that let them mark up the value of distressed loans and securities.

The Financial Accounting Standards Board's decision last week to give bankers more flexibility in valuing certain securities does nothing to alter the underlying fundamentals of the loans that back those assets. As such, bankers are expected to take their time in reviewing their securities portfolios and gauging the longer-term impact of the U.S. economic slump on their business.

Kevin Cummings, the president and chief executive at Investors Bancorp, said he expects his $7.2 billion-asset Short Hills, N.J., thrift company to wait until the second-quarter earnings report to take action on a pool of trust-preferred securities it has already written down to 12 cents on the dollar.

"It would be foolish on our part to just look at this as an opening to write it all up," he said. "From our perspective, this was just a liquidity vehicle."

Jack Ciesielski, the publisher of The Analyst's Accounting Observer, a newsletter from R.G. Associates of Baltimore., said banks are "not going to go out there and randomly start writing everything up — that would be foolish."

Observers say bankers are less likely to mark up assets that face a higher risk of losing value if the economy sours further, such as those tied to commercial mortgages and higher-quality residential mortgages. The concern centers on the danger that the assets, though generating cash flow now, may deteriorate over the course of the year. That could require banks to reverse course and swallow further writedowns, playing havoc with investor expectations and potentially affecting capital levels.

"We have used a fairly conservative analysis to begin with, because we didn't want to be surprised down the road" by possible losses this year or the next, said an accounting executive for a large bank, who asked not to be named. "There is also a bias against volatility, so we're not going to write it up just to turn around and write it back down."

Assets that banks should leave alone for now include collateralized loan obligations tied to commercial mortgages and super-senior triple-A CMOs, which are still prone to impairment as credit issues deepen, the executive said.

Valuations for certain collateralized debt obligations may also go untouched, depending on how managers view future economic conditions, he said.

Sandy Garmong, a Washington executive at Crowe Horwath, said such determinations will be tricky for banks and their auditors, because the accounting standards board is requiring banks by June 30 to revalue any impairment charges "over and above" those taken for credit deterioration that has already occurred. There will be a "gray area" in dealing with valuations for future credit losses, so "there might be some challenges when you make the opening adjustment."

The same issues may apply to small banking companies, though their portfolios generally contain fewer exotic securities. For such institutions, the main challenge will be how to value trust-preferred securities.

Cummings would not rule out the possibility of revaluing Investors Bancorp's securities, which are shared among 20 financial institutions. Nevertheless, the "mark has been made, and we put it behind us," he said. "We're moving forward as a bank and concentrating on lending."

The rule changes are not the only thing that could prod bankers to boost asset valuations.

Meredith Whitney, the head of Meredith Whitney Advisory Group, wrote in a note issued to clients last week that big banking companies could report substantial first-quarter gains on their holdings in Fannie Mae and Freddie Mac as the Federal Reserve Board buys low-interest mortgages backed by the government-sponsored enterprises.

The 10 biggest banking companies raised the holdings of GSE securities by 30% during the fourth quarter, to $128.6 billion at yearend, she wrote.

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