WASHINGTON, US - US REGULATORS on Tuesday offered new guidelines aimed at easing accounting rules blamed by some analysts for worsening the crisis for banks with heavy losses from mortgage securities.

The Securities and Exchange Commission made the announcement offering clarification to companies preparing to report their financial results for the third quarter, which ended on Tuesday.

The rules had required banks to recognise the 'fair value' of their assets and book losses immediately instead of allowing them to wait for a recovery - in some cases pricing the troubled mortgage assets as worthless.

The rule called FAS 157 is an update of the so-called 'mark-to-market' standard requiring accounting for assets at fair-market prices.

The new SEC guidelines say companies must exercise 'judgment' in cases where companies are holding securities with no liquid market.

'Determining whether impairment is other-than-temporary is a matter that often requires the exercise of reasonable judgment based upon the specific facts and circumstances of each investment,' the SEC said. 'This includes an assessment of the nature of the underlying investment.'

The American Bankers Association lauded the move, saying the guidance 'will help auditors more accurately price assets that are difficult to value under current market conditions.'

'The SEC's action will give preparers and auditors of financial statements a better understanding of the accounting literature as they prepare third quarter reports.'

Critics argued that a strict application of the rules has had the perverse effect of weakening financial firms, forcing them to raise capital to offset the anticipated losses - which can put them into a death spiral if cash is scarce.

Some claimed the rules pushed banks to fail because they could not hold assets at the value they had paid and wait for them to recover. -- AFP