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The dust is beginning to settle from the mark-to-market accounting changes last week.

The consensus of analysts and accountants is that the effect on bank earnings from changes instituted by the Financial Accounting Standards Board will be "minimal," in the words of Joseph Longino, an analyst with Sandler O'Neill & Partners LP.

Still, investors might be excused for asking: If the FASB on Thursday gave bankers and their accountants more leeway to value securities that have hurt earnings and capital, why don't bankers mark up the securities they previously marked down?

Much about the new rules remains unclear and requires interpretation and practice to determine exactly how much more favorable the rules are. However, it is clear that some of the FASB changes might allow bankers to increase Tier 1 capital, a ratio closely watched by regulators. The stronger Tier 1 capital is, the sooner banks can pay back money received under the Treasury Department's Capital Purchase Program, said Brian Klock, an analyst with Keefe, Bruyette & Woods Inc.

No doubt, bankers have more discretion in valuing securities for which there are few sales that could establish a benchmark to determine their value, which would allow bankers to use their own models rather than market values; that is the way they value so called "level 3 assets." And yes, they could use that leeway to mark up illiquid securities.

But bankers are unlikely to make use of that new leeway - and their accountants wouldn't let them even if bankers wanted to.

"Given the regulatory environment," bankers and accountants "might not want to be aggressive" in applying the new rules to mark up securities, said Emil Matsakh, a co-head of the risk practice at First Manhattan Consulting Group. Sandler O'Neill's Longino agreed: "Accounting firms will take the most conservative approach" in fair value accounting.

Several large banks have hinted that, at least for now, they will not change a thing about how they mark, up or down, the securities they are holding "for sale," that is, those they have to marked-to-market each quarter according to FASB's "fair value" accounting rules. Citigroup Inc. (C) was the most explicit, saying Thursday it believes FASB's decision on giving bankers more leeway in fair value accounting "will have no impact on Citigroup's financial statements or our existing practices for determining fair values."

FASB also approved changes to accounting procedures for illiquid securities bankers intend to hold to maturity. Those, too, have to be marked in some cases if bankers - and their accountants - determine that they have deteriorated in value. Bankers call this type of charge an "Other Than Temporary Impairment," or OTTI.

Many regional bankers, and even some large banks, particularly the trust and processing banks like Bank of New York Mellon Corp. (BK), were hit by such OTTI charges recently. But they won't be able to mark those securities up again, to the disappointment of at least one regional banker who accused FASB of acting "like a spoiled child" for insisting on rules he believes make no sense.

According to research by Sandler O'Neill, Bank of New York Mellon and Zions Bancorp. (ZION) of Salt Lake City had the largest OTTI charges in the fourth quarter, booking $1.24 billion and $204.3 million, respectively. Bank of New York Mellon would not comment for this story.

Under the new rules, bankers separate the OTTI charge into a credit element and an element tied to market liquidity. The bank would take a charge on the credit element if, for example, the payments on mortgages underlying a security were delinquent. Securities would take a liquidity charge if similar securities have fallen in value on the market, suggesting that the security's market value has also declined and is unlikely to recover fully.

For example, for a mortgage with a face value of $100 that has fallen to a value of $60, a bank would have to take a $40 charge. About two-thirds of such charges - in this example about $27 - will likely be related to market liquidity rather than bad credit, Keefe Bruyette's Klock estimates.

There is a potential benefit to banks from separating the OTTI charge into two elements. Under the new rules, the liquidity part of the charge doesn't have to be deducted from a bank's Tier 1 capital. So in the instance above, the bank could add that $27 liquidity charge into its Tier 1 capital.

"That's not insignificant for the [banking] industry," said Clark B. Hinckley, Zions' head of investor relations. Given the intense investor focus on tangible capital, "it's important to remember that regulators close banks, not hedge funds. Regulatory [Tier 1] capital is more important."

Zions, which in January reported a fourth-quarter tangible common equity ratio of 5.89% and Tier 1 capital of 10.52%, is studying the new rules but has not made decisions or adjustments yet, Hinckley said.

The capital improvement could be of particular benefit to bankers eager to return to the government the funds they had received under the Capital Purchase Program, Keefe Bruyette's Klock said. To repay the funds, they must have strong Tier 1 capital.

How bankers and their accountants will actually use the accounting that would lift Tier 1, however, is another question, particularly since delinquencies are rising and the credit element of the overall charge could increase.

"I would think that CFOs, their accountants and regulators sit in a room and" ponder this new accounting, Klock said. "I don't see a lot of reaction" just yet.

-By Matthias Rieker, Dow Jones Newswires; 201-938-5936; matthias.rieker@dowjones.com