SEC Decides to Continue Mark-To-Market Regulation

The Securities and Exchange Commission is not planning to suspend the controversial mark-to-market accounting rule that has forced banks to report billions of dollars in asset write-downs, a source familiar with the matter told Reuters.

Rumors have circulated that the U.S. government was planning a temporary suspension of the accounting rule, which requires financial services companies to value assets at current market prices.

Oliver P. Quilla for CNBC.com NYSE Traders

The SEC, which oversees and enforces accounting policy, is "not planning a suspension" of mark-to-market, said the source, who was not authorized to speak on the matter and therefore requested anonymity.

Business groups have been pleading with the SEC and the Financial Accounting Standards Board to suspend or amend the rule so that banks will be able to account for their hard-to-value assets more favorably amid the distressed markets.

Financial markets showed little reaction to the news and traders said it was not a surprise.

“This is nothing new from the rhetoric that we had from Fed Governor Lockhart when he said specifically they’re not going to suspend mark to market," David Lutz, a trader at Stifel Nicolaus, a Baltimore-based investment firm, told CNBC.com. Today’s news "does carry some weight obviously. It’s all headline risk out there now because everyone is so underweight and short this sector.”

Lutz said the market is mixed on suspending the rule.

“It’s a double-edged sword," he said. "It’s important because we get some level of alleviation to the balance sheets that are getting continuously marked down. On the other side, it decreases transparency, which is never good.”

Federal Reserve Chairman Ben Bernanke also said on Tuesday that he did not favor suspending mark-to-market financial accounting, but understood the problem of valuing assets in highly disrupted markets.

"I would not support any suspension of mark-to-market," the Fed chief told the Council on Foreign Relations after delivering a speech on financial regulation.

Bernanke, however, did say that he would like to see more done to provide guidance to banks and financial firms on how they can give indications of value for assets being traded under fire-sale market conditions.

A House Financial Services subcommittee is set to examine the accounting rule on Thursday.

Ahead of the hearing, dozens of business groups and federal home loan banks expressed their concerns to the top lawmakers on the full House Financial Services Committee.

"Appropriate changes in mark-to-market accounting should not wait until mid-year or year-end," said the letter addressed to Barney Frank of Massachusetts, the committee's chairman, and Spencer Bachus of Alabama, the committee's top Republican.

"That will only allow the spiral of accounting-driven financial losses to continue," the letter said.

The letter, dated March 9, was signed by some of the biggest industry groups, such as the U.S. Chamber of Commerce and the American Bankers Association as well as a number of federal home loan banks.

—CNBC.com contributed to this story

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