Bank of America is calling its misclassification of up to $10.7 billion in assets an "unintentional" accounting error, the WSJ reports.
The bank told federal regulators it mistakenly logged six of its short-term financing deals — known as repos — as sales, when they really should have been reported as debt.
As we discussed earlier this year, this is a way for banks to temporarily hide their debt by selling off their undesirable assets just long enough to keep them out of the bank's end-of-quarter balance sheet.
Once the quarterly report is published, the banks borrow cash to repurchase their original assets, and the debt remains hidden. It's called "window dressing."
B of A says the misclassifications were "not related to any fraud or deliberate error," according to the letter to the SEC, Bloomberg News notes. Update: Here's the complete letter.
The SEC has yet to take any action against B of A over the matter. A company spokesman told Bloomberg that the issue isn't material, given B of A's huge, $2.3 trillion balance sheet.
"A $10.7 billion accounting error would be a material event for about 99.9 percent" of U.S. banks, the director of Boston University's banking and financial law center told Bloomberg. "It's hard to see how the SEC can accept B of A's rejoinder as being sufficient."
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