Tags: Banks | Balance | Sheets | Hide | Risk

Report: Banks Tweak Balance Sheets to Hide Risk

By    |   Wednesday, 26 May 2010 01:10 PM

Banks reportedly continue to manipulate their financial statements to show less debt just before quarterly earnings reports.

Bank of America, Citigroup and Deutsche Bank are among the most aggressive in doing so, according to The Wall Street Journal.

And this activity has multiplied since 2008, despite the fact it helped cause the financial crisis.

During the past 10 quarters, the three big banks cut their net borrowings in the repurchase market by an average of 41 percent at quarter-end compared to the quarter as a whole, the Journal reports.

Then once a new quarter started, they boosted the borrowing again. Bank leverage levels also tend to decline at quarter-end, the Journal discovered.

The moves make the banks’ quarter-end numbers "at best meaningless and at worst misleading and disingenuous," accountant Robert Willens told the Journal.

Many banks still use ostensibly independent entities to hide their bad investments, something Lehman Brothers did before its collapse.

Banks seldom mention the obscure companies’ names outside of their footnotes and sometimes keep totally quiet about them.

“How can anyone — regulators, investors — understand what’s in these financial statements if they have to dig 15 layers deep to find these kinds of interlocking relationships and transactions?” Francine McKenna, an accounting consultant, told the New York Times.

“Everybody’s talking about preventing the next crisis, but they can’t prevent the next crisis if they don’t understand all these incestuous relationships.”

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Banks reportedly continue to manipulate their financial statements to show less debt just before quarterly earnings reports. Bank of America, Citigroup and Deutsche Bank are among the most aggressive in doing so, according to The Wall Street Journal. And this activity...
Banks,Balance,Sheets,Hide,Risk
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2010-10-26
Wednesday, 26 May 2010 01:10 PM
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