Key Findings
•  The weighted average fair value of loans for the 20 banks in Fitch’s sample declined
from a multiyear high of 102.5% of net book value at Dec. 31, 2002, to a multiyear
low of 95.4% as at June 30, 2009.  
•  Hypothetically, if the proposal for loans were adopted in the third quarter of 2009,
it would result in a decrease in shareholders’ equity of $130 billion (approximately
14% of the combined total equity of all the 20 banks reviewed). This reduction
excludes offsets from applying fair value to the liabilities that fund the loans.
•  Loans made up an average 54% of the total assets of the banks reviewed, with less
than 2% of total loans outstanding currently measured at fair value.
•  From the data gathered, it is difficult  to establish a set long-term trend between
the deterioration in the fair value of net loans disclosed by the banks reviewed and
loan loss/net chargeoff metrics. Therefore, interpreting differences between the
fair value and the carrying amount of loans is ambiguous at best.
•  Significant disparities were noted in how banks currently measure the fair value of
their loan portfolios. In addition, the lack of disaggregation in current disclosure on
the fair value of loans hinders comparability and analysis.