Report: SEC looking at banks that restructure loans to make them look healthier
The Securities and Exchange Commission (SEC) is scrutinizing U.S. banks that have restructured troubled loans in order to make them appear healthier than they really are, according to a report.
Regulators are seeking information from an unknown number of regional and community banks with large concentration of commercial real estate loans, the Wall Street Journal said.
The SEC is scrutinizing a practice known as “extend and pretend” or “amend and pretend,” in which a bank gives a borrower more time to repay a loan. Banks are permitted to modify loans to help troubled borrowers, according to the paper.
The SEC also is looking into a more common practice called “troubled debt restructurings.” Such restructurings involve modifying an existing loan by changing the terms or breaking the loan into pieces.
Although the practice is permitted, SEC officials are concerned about the way some banks are accounting for such loans, the paper said.
SEC could not immediately be reached for comment by Reuters outside regular U.S. business hours.
Fifth Third Bancorp said in its annual report on Monday that it is under investigation by the U.S. Securities and Exchange Commission for how it accounted for and reported some of its commercial loans.
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