The Impact of SFAS No. 157 on Commercial Banks |
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Authors: | Richard Schroeder David Schauer |
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Institution: | (1) University of North Carolina at Charlotte, Charlotte, NC, USA;(2) Department of Economics and Finance, University of Texas at El Paso, El Paso, TX, USA |
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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. |
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