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The Impact of SFAS No. 157 on Commercial Banks

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  • Richard Schroeder
  • David Schauer

Abstract

During 2008, U. S. banks were mired in a credit crisis. According to a group of economists and bankers, one cause of the 2008 credit crisis was an accounting rule termed mark-to-market. This rule required banks to write down large portions of their investment portfolios. The purpose of this study is to examine the impact of the mark-to-market model on a sample of banks for the first three quarters of the year 2008. Results indicated that while banks grew by 20% over time, the percentage of assets measured at fair value rose only slightly. Additionally, the results indicated that applying the mark-to-market rule did not reduce the regulatory capital position of banks. Copyright International Atlantic Economic Society 2010

Suggested Citation

  • Richard Schroeder & David Schauer, 2010. "The Impact of SFAS No. 157 on Commercial Banks," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(2), pages 175-189, May.
    • Handle: RePEc:kap:iaecre:v:16:y:2010:i:2:p:175-189:10.1007/s11294-010-9256-1
    DOI: 10.1007/s11294-010-9256-1
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    References listed on IDEAS

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    1. Peter J. Wallison, 2009. "Fixing fair value accounting," OECD Journal on Budgeting, OECD Publishing, vol. 9(2), pages 1-8.
    2. Raghuram G. Rajan, 2005. "Has financial development made the world riskier?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 313-369.
    3. repec:aei:rpaper:30923 is not listed on IDEAS
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    More about this item

    Keywords

    Capital adequacy; Commercial banks; Credit crisis; Mark-to-market; SFAS 157; M41;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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