MANILA, Philippines -- The country?s banks are likely to reclassify some of their debt and equity holdings to reflect values ahead of the global financial crisis after the central bank eased mark-to market rules, bankers said on Friday.

But there won't be a scramble to shift all financial assets away from fair value accounting despite continued volatility in markets. Instead, banks are likely to reclassify their holdings selectively.

"I think it is expected because asset prices do not reflect the true underlying values of these assets, especially those issued by the national government," said Victor Valdepenas, Unionbank president, when asked if banks will make use of the central bank's easing of accounting rules.

The central bank late on Thursday approved guidelines allowing financial institutions to stop using fair-value or mark-to-market accounting of their debt and equity holdings.

The shift was made to align local accounting standards with the easing of fair-value rules in the United States and Europe.

Global accounting standards were relaxed due to ballooning mark-to-market losses that have pressured banks globally to top up their basic capital amid tight money markets due to the worst financial crisis in decades.

Assets can now be based on the value at the time of acquisition, rather than their current market value used under mark-to-market rules. Assets acquired before July 1 are eligible for the reclassification although they have to be held until maturity.

Banks have until the end of the year, or Dec. 31, to reclassify assets.

"This mark-to-market system must be applied properly," Valdepenas said. "To have an outright application, particularly during the time when the market is not working doesn't make sense."

"It is just right to suspend it," he said.

But banks are unlikely to shift all of their assets under the new system.

"I think it will be done selectively, it's not an all or nothing package," said a fund manager from a foreign bank. "I doubt if they will do it for everything, otherwise the gains will be wiped out."

At present, Philippine banks' balance sheets are healthy enough to withstand heavy mark-to-market losses but the burden is beginning to be "painful," said Nestor Espenilla, a deputy governor of the central bank.

"This (move) recognises that prices today are very unstable and potentially not reflective of fundamentals," Espenilla said. "This would help stabilize the situation."