Scholes, Fellow Laureate Merton Call for Better Bank-Asset Data

Discussion in 'Data Sets and Feeds' started by ASusilovic, Aug 19, 2009.

  1. Aug. 19 (Bloomberg) -- Myron Scholes joined Robert Merton, with whom he shared the 1997 Nobel prize for economics, in calling for banks to give investors a clearer picture of their worth by providing better valuations for illiquid assets.

    Banks should value illiquid assets by expanding the use of mark-to-market accounting or listing them on public exchanges whenever possible, Scholes said in a Bloomberg Radio interview yesterday. Scholes, winner of the Nobel with Merton for helping invent a model for pricing options, said investors need better pricing data to accurately value the debt and equity securities of banks.

    “I’d like to see us encourage many more securities held on the books of the banks be migrated to exchanges if possible,” he said. Doing so would “allow for market discovery and market pricing as much as possible,” Scholes added.

    Banks that oppose new accounting standards on asset values want to conceal depressed prices, Merton wrote in the Financial Times yesterday. He composed the column with Robert Kaplan, a professor at the Harvard Business School along with Merton, and Scott Richard, who the newspaper identified as a professor at the University of Pennsylvania’s Wharton School.

    “This is not the way forward,” they wrote. “While regulators and legislators are keen to find simple solutions to complex problems, allowing financial institutions to ignore market transactions is a bad idea.”

    That's a very good suggestion !