Regulators to Take Aim at Bank 'Window Dressing'


Regulators may outline new rules to target so-called window dressing, a practice that some banks use to temporarily reduce their debt levels before reporting their finances.

The SEC is scheduled to raise the matter at a meeting on Friday, then issue proposals for public comment, The Wall Street Journal said.

Window dressing isn't illegal, but it can understate banks' borrowing and risk taking. According to a Wall Street Journal analysis, 18 large banks as a group consistently lowered debt at the end of each of the last six quarters. On average, they reduced debt by 42% from the quarterly peak.

Since the financial crisis, regulators have worked to make bank balance sheets more transparent and to restrict risk taking.

The SEC is expected to propose rules demanding greater disclosure from banks and corporations regarding their short-term borrowing.