institutions if they are not marked to market. For FIs, the majority of the assets and liabilities are loans and deposits which are easy to evaluate their market value or fair value with the exception of loan loss. The tricky part is the derivatives. And for derivatives, the mark-to-market or fair value methodology is varied. Some are straightforward and some are as complicated as the process of re-packaging of those exotic investments like CDS, CDOs and CMOs. It is not easy for the banks to get broke with all the Tier 1 and Tier 2 capital requirements as per the law.
