Jun
24
Banks May Be Using Lehman-Style Trick to Disguise Debt
By-
Debt may be within limits just four times a year, BIS says
- Repo allows banks to deflate balance sheets at reporting time
Banks may be disguising their borrowings in a way similar to that used by Lehman Brothers Holdings Inc., with debt ratios falling within limits imposed by regulators just four times a year.
Lenders use repurchase agreements — known as repos — to massage down their assets as reporting dates approach, typically as quarters end, the Bank for International Settlements said in its Annual Economic Report. The practice boosts leverage ratios — the ratio between capital and so-called leverage exposures — allowing banks to report them as being in line with regulatory requirements, it said…
