BNP Paribas: US Banks Try To Delay Accounting Rules

Just a reminder for "all clear" banking fans, BNP Paribas wrote in its Credit Objective yesterday:

The "Fair Value Coalition", a group of US banks formed earlier this year to promote changes to mark-to-mark accounting rules, is trying to push the boundary further and convince regulators to delay an accounting rule that would force them to bring some of their off-balance-sheet vehicles back onto their books next year. This would help the banks avoid raising additional capital, while they hope that profits will build up fast enough to compensate for losses on legacy assets. The odds that retained earning will be enough to avoid raising more capital are thin, in our view. The exceptionally strong results the banks posted in Q1 2009 are likely to be just that - exceptional - and prove to be unsustainable in the medium term. In most cases, strong earnings came from trading and primary market activity; however, with the market normalising, bid-offer spreads and fees are coming down towards more normal levels, making it harder for banks to make easy profits. Other business lines, such as securitisation and M&A, remain very weak, and may not be able to contribute enough to the bottom line to compensate for weaker trading revenues. This could be why banks are so keen to push any additional capital requirements as far back as possible, while they keep on playing for time.

Why such negativism? Probably, because my bank sent me the new price-list yesterday? Or the U.S. Said to Plan Approval Today for 10 Banks to Repay TARP? Whatever! Moral hazard should provide a support to risk markets?