At last, calm is following the storm of protest by banking interests against the principle of fair value accounting, which values assets at what they would fetch on the market, where there is a market. Until recently, objectors were hostile to fair value at exit price. Their motivation was fear of a potential “downward spiral in asset values”. That got them mocked as promoting “Alice in Wonderland” accounting.

Now there is evidence that the bankers are swallowing the mark-to-market pill. This change of mood was reflected in Europe at a meeting in May of various financial interests held at the European parliament Financial Services Forum. The feeling at the Brussels meeting indicated banks are finally caving in to the fair value argument. The discussion is switching to what mark-to-model techniques should be used for evaluating assets in illiquid markets.