Mon, July 12, 2010
Business > Industries

Bank of America wrongly classified transactions

2010-07-12 03:09:37 GMT2010-07-12 11:09:37 (Beijing Time)  China Daily

SAN FRANCISCO -Bank of America Corp said it wrongly classified as much as $10.7 billion of short-term repurchase and lending transactions as sales from 2007 to 2009 to reduce its end-of-quarter assets.

Bank of America said the inaccuracies were not material and "don't stem from any intentional misstatement of the corporation's financial statements" and were "not related to any fraud or deliberate error", according to a May 13 letter released over the weekend from the US Securities and Exchange Commission (SEC).

"A $10.7 billion accounting error would be a material event for about 99.9 percent" of US banks, said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University School of Law. "It's hard to see how the SEC can accept BofA's rejoinder as being sufficient."

The SEC sent letters to finance chiefs at about two dozen firms in March asking whether they employed accounting strategies like those at Lehman Brothers Holdings Inc. The bankrupt securities firm was accused of using repurchase agreements to move assets off its balance sheet to hide leverage, to improve its capital ratios. Bank of America had disclosed in a March 31 financial filing that "certain sales of agency mortgage-backed securities should have been recorded as secured borrowings rather than sales," bank spokesman Jerry Dubrowski said.

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