FASB recently approved plans to proceed with an accounting model whereby loans and debt securities that are held as “customer financing activities of a bank” to be recorded at amortized costs in response to the massive opposition of bankers and investors. However, question still remain as what will be the ultimate impact to the bank’s financial statements. For example currently classified securities as HTM (held to maturity) could be subject to MTM (mark to market) and determining the exact definition of “customer financing activities” is still up to FASB to decide. So it deals with managing credit risk rather than ALM (asset liability management) topic but what do they in the event of a deep dive on valuation while managing the credit? This line in the sand needs to be addresses clearly by FASB and I’m sure they will. Follow the link to learn more about this topic:
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