Banks NOW Getting HAMMERED; WTF Will They Do When M2M Under FASB Is Re-Enacted?

[Ivanovich]

Quote from ByLoSellHi:

The people that are arguing for a return to M2M are a few prominent economists who see value in transparency, long term, even if re-implementing it will cause severe losses and some degree of financial shock.

The banks and other financial institutions are still deeply opposed to reinstating M2M.

Thing is, the losses are already there. This would just be realizing them. It's no different than a trader who ignores his unrealized P+L but only focuses on the account realized balance.

 

[IanMacQuaide]

Quote from ByLoSellHi:

The people that are arguing for a return to M2M are a few prominent economists who see value in transparency, long term, even if re-implementing it will cause severe losses and some degree of financial shock.

The banks and other financial institutions are still deeply opposed to reinstating M2M.

So what's to keep any company from stating wild-assed inflated earnings just to watch their stock jump?
If the banks can do it.....

 

[number22]

Word of cautions, M2M will probably make Canadian Banks look worst than its current states. Anyway, CIBC is the worst Bank in Canada. I think I have stated this long time ago on this forum.

 

[ByLoSellHi]

Quote from IanMacQuaide:

So what's to keep any company from stating wild-assed inflated earnings just to watch their stock jump?
If the banks can do it.....

Because our wise legislators carved out a particular exception of banks and financials, geniuses in all of their infinite wisdom that they are.

 

[Kassz007]

Quote from Ivanovich:

Thing is, the losses are already there. This would just be realizing them. It's no different than a trader who ignores his unrealized P+L but only focuses on the account realized balance.

+1

I can understand the illiquid market aspect of not wanting to report losses due to abnormal conditions, but I think they need to bite the bullet on this one for the sake of transparency and comparitability.

 

[Kassz007]

Quote from number22:

Word of cautions, M2M will probably make Canadian Banks look worst than its current states. Anyway, CIBC is the worst Bank in Canada. I think I have stated this long time ago on this forum.

Mark to market has always been employed in Canada. It was never repealed. FASB governs accounting policy in the USA only, so the FASB re-enacting M2M will not affect Canadian banks whatsoever.

As for CIBC being the worst bank in Canada, this point is debatable. But for arguments sake, let's say you are correct and it is the worst bank. Did you read the CIBC Q3 earnings report? Quite healthy and profitable indeed. If CIBC is the worst, Canadians have nothing to worry about.

 

[trendlover]

Quote from ByLoSellHi:

The people that are arguing for a return to M2M are a few prominent economists who see value in transparency, long term, even if re-implementing it will cause severe losses and some degree of financial shock.

The banks and other financial institutions are still deeply opposed to reinstating M2M.

Ok, I understand.
But why change the strategy (no mark to market) that was to help a recovery, before they give that strategy time to work?
If there is no value in transparency before (so they say no mark to market) why is the value now?

 

[number22]

Quote from Kassz007:

Mark to market has always been employed in Canada. It was never repealed. FASB governs accounting policy in the USA only, so the FASB re-enacting M2M will not affect Canadian banks whatsoever.

Not true, Bank of Canada has clearly stated in 2008 that Canadian Banks don't have to M2M related to American Sub-prime loan exposures. Ever since then, every Canadian bank has increased their loan lose provisions. What does it tell you?

 

[Kassz007]

Quote from number22:

Not true, Bank of Canada has clearly stated in 2008 that Canadian Banks don't have to M2M related to American Sub-prime loan exposures. Ever since then, every Canadian bank has increased their loan lose provisions. What does it tell you?

Did you not read the CIBC and BMO Q3 earnings reports?

See this article:
http://ca.news.finance.yahoo.com/s/...-third-quarter-profit-434-million-misses.html

"CIBC's quarterly financial performance was dragged down by $106 million in mark-to-market losses on credit derivatives from the bank's corporate loan-hedging program, as well as $56 million in loan losses."

Clearly M2M is being employed. FASB has no jurisdiction over Canadian banks whatsoever. Perhaps the M2M losses aren't included in SEC filings for the US exchanges, I don't know, but as you can see, they are minimal.

Also, see this article on loan loss provisions:
http://www.foxbusiness.com/story/markets/industries/finance/update--bank-montreal-q-profit--pct/

"BMO said it cut its loan-loss provisions this quarter from C$484 million to C$417 million, as fewer consumers defaulted on loans and asset prices rose during the period."


So, Mark to market accounting is in place, and every Canadian bank has <b>not</b> increased provisions for loan losses. What does THAT tell you?

 

[number22]

Quote from Kassz007:

So, Mark to market accounting is in place, and every Canadian bank has <b>not</b> increased provisions for loan losses. What does THAT tell you?

It only tells banks have waited until market turned from worst, by using loan lose provisions to delay enforcing M2M. All these banks has already wrote off billion on billion dollar last year, yet they still have loan lose provision in their books, clearly no-one has the final figure yet. (granted BMO has its better quarter) which doesn't change the fact, Canadian don't have to do M2M until market conditions change to their favor.