Panelists were enthusiastic about FAS 155, the Financial Accounting Standards Board's recent update to derivatives accounting standard FAS 133, saying it would boost participation in the synthetic collateralized debt obligation market. The change to fair-value accounting for all hybrid instruments removes mark-to-market on-balance sheet accounting, which was a deterrent to many investors because of the volatility it adds to balance sheets, panelists said.
"FAS 155 will open the door to more U.S. and Asian investors," said Jason Morris, director of structured products at Aladdin Capital Management, noting market-value CDOs are more prevalent in these regions. "This is the tip of more fair-value accounting going forward," said Michael Hall, partner at KPMG. The lack of provisions for credit-linked notes, however, is a potential problem worth watching, panelists said.
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