Tags: US | SEC | Banks

SEC Eyes New Rules on Banks' Debt-level Disclosure

Friday, 17 Sep 2010 08:53 AM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

WASHINGTON (AP) — Federal regulators are set to propose new rules that could make it harder for financial firms to disguise their level of debt.

The expanded disclosure requirements would apply to banks' practice of temporarily trimming their debt at the end of quarters to make their financial statements appear stronger. The practice is legal but regulators say it can give investors a distorted picture of a bank's debt and level of risk.

Lehman Brothers used so-called repurchase agreements as an accounting trick in the months before its collapse into the biggest bankruptcy in U.S. history two years ago. The demise of the Wall Street titan triggered a panic in financial markets.

Lehman had put together complex transactions that allowed the firm to sell billions in mortgage securities at the end of a quarter — wiping them off its balance sheet when regulators and shareholders were examining it — and then to quickly buy them back. The repurchase agreements, detailed in a report issued in March by a court-appointed examiner, were known as Repo 105.

The Securities and Exchange Commission is expected to propose the new rules and open them to public comment at a meeting on Friday. They could be formally adopted sometime later, possibly with changes.

The term "window dressing" to sometimes used to describe the practice of big banks and financial firms sweeping away debt at quarter's end, then buying back the assets and building up debt again in a new quarter.

Banks are required to disclose their short-term borrowing only once a year. The SEC could, for example, propose increasing the required frequency of reporting.

The SEC last spring sent letters to 19 big financial firms asking about their use of repurchase agreements.

The agency found from its canvass that "people were using repos quite extensively," with a marked spike in volume just before quarters' end, Wayne Carnall, chief accountant of the SEC's corporation finance division said Wednesday.

However, the agency "did not find any significant noncompliance with the accounting standards" with banks' use of repos, Carnall told a gathering of the American Institute of Certified Public Accountants. In a few instances, he said, banks acknowledged they had made errors but said they weren't significant.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Rick Perry: Oklahoma Beheading Was Terrorism

Tuesday, 30 Sep 2014 10:32 AM

Texas Gov. Rick Perry is calling on the Obama administration to take a deeper look into a beheading at a food plant in O . . .

Congress Must Act or Dozens of Tax Breaks to Expire at Year's End

Tuesday, 30 Sep 2014 10:24 AM

While it will be termed a lame-duck session, when Congress returns to business following the election, they have a packe . . .

Robert Reich: Reagan Policies Killed Job Creation

Tuesday, 30 Sep 2014 10:00 AM

Ronald Reagan's economic policies that allowed the rich to accumulate wealth have stifled job creation and hurt the econ . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved