Major US Banks Masked Risk Levels: Report
Major U.S. banks temporarily lowered their debt levels just before
reporting in the past five quarters, making it appear their balance
sheets were less risky, the Wall Street Journal said, citing data from
the Federal Reserve Bank of New York.
The paper said on Friday 18 banks, including Goldman Sachs Group (NYSE:GS - News), Morgan Stanley (NYSE:MS - News), J.P. Morgan Chase (NYSE:JPM - News) Bank of America (NYSE:BAC - News) and Citigroup (NYSE:C - News),
understated the debt levels used to fund securities trades by lowering
them an average of 42 percent at the end of each period.
The banks had increased their debt in the middle of successive quarters, it said.
Citi, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley were not immediately available for comment when contacted by Reuters outside regular U.S. business hours.
Excessive leverage by the banks was one of the causes that led to the global financial crisis in 2008.
to the credit crisis, banks have become more sensitive about showing
high levels of debt and risk, worried their stocks and credit ratings
could be punished, the Journal said.
Federal Reserve Bank of New York could not be immediately reached for comment by Reuters.
(Reporting by Sakthi Prasad in Bangalore; editing by Karen Foster)