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Criticism of banks who marked assets at “level three” for accounting purposes is gaining a fair bit of ground. Until now, Goldman Sachs has taken the heat as the biggest level three booker on Wall Street. But on Monday Citi filed a claim with the SEC tripling it’s previously stated level three ledger. The bank now has $134.8bn booked at level three.

Under Financial Accounting Standards Board Statement 157, financial institutions can book assets at level three values when the market cannot efficiently price the assets itself. Whether the market is “efficient” is at the banks’ discretion. Under level three, banks’ can effectively price assets at how much they think they should be worth.

Via comments on Nouriel Roubini’s blog, here’s an interesting little exercise:

Level three to equity ratios

Citigroup
Equity base: $128bn
Level three assets: $134.8bn
Level 3 to equity ratio: 105 per cent

Goldman Sachs
Equity base: $39bn
Level three assets: $72bn
Level 3 to equity ratio: 185 per cent

Morgan Stanley 
Equity base: $35bn
Level three assets: $88bn
Level 3 to equity ratio: 251 per cent

Bear Stearns
Equity base: $13bn
Level three assets: $20bn
Level 3 to equity ratio: 154 per cent

Lehman Brothers
Equity base: $22bn
Level three assets: $35bn
Level 3 to equity ratio: 159 per cent

Merrill Lynch
Equity base: $42bn
Level three assets: $16bn
Level 3 to equity ratio: 38 per cent

Now of course, simply because assets are priced at level three does not mean the sky is falling in. Often there is a good reason why they are marked so. But as a broad observation, level three assets are illiquid and therefore carry a certain amount more risk than other readily tradable - and disposable - assets.

Interesting then that two of the banks the market is least worried about - Goldman Sachs and Morgan Stanley - have level three to equity ratios far higher than their suffering peers, Merrill Lynch and Citi.

One key thing to consider, of course - that these figures don’t reflect - is how well hedged against these level three positions banks’ are. Citi, as was made clear by Gary Crittenden, Citi chief financial officer, in a conference call on Monday, has had trouble in tying down counterparties. Not so for Goldman.