Readings: FAS 157 and FAS 159, Currency controls, India’s order book
- Times Online: Why FAS 157 strikes dread into bankers
What are FAS 157 and 159? They are the new United States (Federal) accounting standards that have been introduced to regulate the valuation of bank assets.
The new rules divide bank assets into three “levels”, according to the freedom with with which they can be bought or sold. Level-1 assets, which are easy to value or trade, have to have quoted prices in active markets such as US government bonds or gold bullion. Level 2 is an intermediate stage; these assets are not as fully marketable as level one, but still sufficiently tradeable to have a definite value. Level-3 assets – usually artificial financial instruments – are the problem. They do not have quoted prices in active markets. They have to be valued by reference to the bank’s own models.
. . . Goldman Sachs. The bank has disclosed $72 billion of level-three assets, out of total assets of $900 billion. That seems reasonable enough, but it compares with Goldman Sachs’s capital of $36 billion.
Instead of using currency reserves or interest rates to influence foreign exchange markets, central banks and finance ministries are setting up obstacles to keep the falling dollar from threatening company profits and economic growth.
“Central banks are trying noninterest rate methods to stabilize growth and capital flows,” said Bank of Tokyo- Mitsubishi’s Fullem. “It’s something extraordinary. They haven’t used these venues for a long time. It’s sort of the last resort the central banks would like to tap.”
- Business Standard: India Inc`s order book overflows on strong growth impulse
In the first 10 months of calendar year 2007, Indian companies received orders worth Rs 128,147 crore. This is 68.6 per cent more than Rs 75,984 crore in the same period a year ago.
Orders have been pouring in from Indian and foreign companies, the central and state governments and local bodies for construction of roads, power plants, refineries, turnkey projects, electronic goods and water and irrigation works.
More than a quarter of the orders (Rs 34,680 crore) came from foreign companies and Rs 42,041 crore came from domestic private companies.
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