Abstract
AbstractAll U.S. corporations have a vital stake in the safety‐and‐soundness regulation of banks. At the heart of that regulation is the banks' accounting system. Many believe that the existing framework of generally accepted accounting principles (GAAP) is wholly inadequate for regulatory needs. As this article contends, it should be replaced by a market value accounting (MVA) framework for all bank assets, liabilities, and off‐balance‐sheet items. Although MVA would not be perfect, it would be aimed at the proper target and would be far superior in reporting banks' true net worths (capital) to regulators and thereby allow the latter to better stave off costly bank insolvencies.
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