(LUXEMBOURG) - EU finance ministers called on Tuesday for a relaxation in bank accounting rules for valuing their assets on concerns that recent US changes could put European groups at a disadvantage.

"We want to put European groups on an equal footing with their American counterparts," French Finance Minister Christine Lagarde said after chairing talks in Luxembourg.

Currently, banks must book their assets at current market valuation, meaning that they have had to take massive losses on many of the home loans which have turned sour as a result of the US subprime mortgage crisis.

These 'toxic assets' have fallen sharply in value and when accounted for mean that the banks are faced with shortfalls in their accounts which have to be made up.

As credit has dried up, the banks have been unable to raise the fresh capital needed to repair their balance sheet, resulting in failures and rescue as the financial crisis has ripped through the industry.

At the end of September, US regulators offered new guidelines aimed at easing these accounting rules which some analysts believe had only made the crisis worse for banks with heavy losses on their US mortgage securities.

"American companies are now allowed to transfer their assets from their trading books, where they are valued at their market price, to their banking group (books) where they are kept to maturity," Lagarde said.

"This possibility to re-value assets under a different methodology must clearly be available to European companies," she added.

The ministers called on the European Commission to draft proposals by the end of the month so that they could apply to third-quarter 2008 accounts.

They also urged international and US accounting standard-setters to work together to resolve the issue.

Economic and Financial Affairs Council (ECOFIN)

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