Federal agencies that set accounting standards in the US have issued guidelines that will allow banks greater flexibility in valuing securities in a fluctuating market.

Under pressure from banks and lawmakers, the Securities Exchange Commission, on Tuesday relaxed accounting rules that would make its easier for banks to report marginal losses or even profits when they announce third quarter results. The statement announcing the move was issued jointly by the chief accountant of the SEC as well as staff of the Financial Accounting Standards Board.

The Bankers Association of America praised the move which comes after the bankers had complained that auditors were pressurizing banks to value assets at unrealistically low prices rather than considering the higher rates which they might be worth in an orderly market. The fair-value rule was also criticized by some Congressmen who demanded that it be scrapped in the billion bail-out plan that was defeated on Monday.

However SEC clarified that it was merely interpreting the mark-to-market rule and not dropping it altogether. Also analysts from the other end of the debate justified the existence of the rule on grounds that bankers are themselves responsible for the critical situation because of the risky assets they had purchased. Nonetheless the new guideline comes as a great relief for bankers who have been reeling under the spate of bankruptcies and acquisitions.