The move away from market consistency
Market consistency was intended to bring transparency to valuing long-dated liabilities but the volatility it brought to balance sheets has led some to question its validity, and even ask for a return to using book values. Laurie Carver reports
"When the facts change," said the economist John Maynard Keynes when challenged on his U-turn on monetary policy during the depression, "I change my mind. What do you do, sir?"
This could be some of today's former market-consistency zealots, for whom the financial crisis changed the facts. The mantra of discounting liabilities at market risk-free rates in regulation has been adapted to dilute their balance sheets' dependence on the vagaries of the market. Some are even calling for a return to
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