Disclosure of Problem Assets in Financial Institutions

The Securities and Exchange Commission (SEC) issued regulations S-K, S-X, and Industry Guide 3 to govern problem asset disclosure. The chief financial officers of banks and savings and loan (S&L) associations should be fully aware of the SEC requirements for reporting such risk elements in publi...

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Bibliographic Details
Published inFinancial managers' statement Vol. 14; no. 1; p. 11
Main Author Powell, Steve H
Format Journal Article
LanguageEnglish
Published Chicago Financial Manager's Society, Inc 01.01.1992
Subjects
Assets
Bank Accounting
Disclosure
Financial institutions
Financial reporting
Loans
Problem Loans Loan Workouts
Regulations
US
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Summary:The Securities and Exchange Commission (SEC) issued regulations S-K, S-X, and Industry Guide 3 to govern problem asset disclosure. The chief financial officers of banks and savings and loan (S&L) associations should be fully aware of the SEC requirements for reporting such risk elements in publicly traded institutions as: 1. nonaccrual loans, 2. past due loans, 3. restructured loans, 4. potential problem loans, 5. foreign outstandings, and 6. loan concentrations. As regulators strengthen their examination process, it seems that more assets are being adversely classified. The Federal Deposit Insurance Corp. has 3 adverse classification categories for loans: 1. substandard, 2. doubtful, and 3. loss. Yet, some banks and S&Ls, assisted by independent auditors, follow evasive practices and do not provide full disclosure of problem assets. Misrepresentation and underreporting leave management and auditors open to questions of credibility and greed.
ISSN:0887-4808