New Accounting Standard Could Raise US Bank Assets

The adoption of new accounting standards may help banks in the U.S. to dramatically boost their assets, despite a reluctance among officials to conduct an overhaul of the current system during a time of widespread economic uncertainty.

Last month, the U.S. Securities and Exchange Commission published a proposal that called for the adoption of only parts of the International Financial Reporting Standards.

While the International Accounting Standards Board has been stressing for adoption of a global system, the board's U.S. counterpart, the Financial Accounting Standards Board, recently tendered a convergence proposal that Standard & Poor's argues could boost banks' assets.

"In its current form, U.S. companies would not be allowed to offset as many financial assets and liabilities (particularly derivatives) as now permitted," the agency said. "This will result in larger balance sheets, particularly for large, complex financial institutions."

Under the IFRS, which U.S. officials have been hesitant to embrace, there are no exceptions for derivatives. The new proposal would eliminate such exceptions in the U.S. and, according to S&P, "gross up" balance sheets.