The FT has reported that:
Banks have been given a one-year reprieve by US accounting standard-setters from having to take up to $5,000bn (£2,520bn) of debt assets on to their balance sheets, easing fears that they would be forced to raise large amounts of new capital quickly.
Robert Herz, FASB chairman, said that the move was made reluctantly after a staff recommendation for a delay because there might not be enough time for all companies to adjust to the up-heaval.
As the FT notes:
Since the credit crunch, many banks have been forced to bring some such vehicles back on to their books, angering investors who did not know about the holdings.
In May, analysts at Citigroup forecast that banks could be forced to bring up to $5,000bn of assets back on to their balance sheets when the new rules came into force.
Lawmakers and banking industry groups have issued calls for a delay in recent weeks because of the potentially huge detrimental effect the changes could have on banks' capital bases and their ability to raise new capital.
The FASB said it had decided to change the date as a result of "comments and feedback that we received". The original proposed date was an "ambitious" one that had been reconsidered, it said.
Mr Herz said during the meeting he was "chagrined" by what had been uncovered as the rule changes were prepared.
He added that there had been a mixture of poor reporting and a lack of proper enforcement.
Now let's be clear what this means. Banks who have been responsible for poor reporting, which has been tolerated due to their auditor's failing to properly enforce existing rules have submitted comment to FASB that they cannot possibly comply with new accounting rules as yet because they need to raise new capital in the meantime, and can only succeed in doing so if they can continue to misrepresent the true extent of their assets of limited worth and actual liabilities.
In a litigious world wouldn't you think that FASB might be putting themselves at risk of class actions from future aggrieved shareholders by knowingly putting those people's wellbeing at risk by allowing continuing misrepresentation of the true and fair view in the accounts of US banks? That seems to me to be exactly what they are doing.
I am staggered at FASB's complicity with this abuse, and lack of willing to impose appropriate rules. I do not agree that the banks could not comply: their inability is self motivated lack of willing, which is something quite different.
And whilst this continues expect the credit crunch to get much worse as the spiral of losses goes on.
And who do I blame? There are just four audit firms who can carry the blame for failure of proper enforcement. They are of course PWC, KPMG, Ernst & Young and Deloittes. They carry an enormous burden of responsibility for the failure of accounts to show a true and fair view, a failure that allowed the credit crunch to develop.