U.S. banks would have to disclose a clearer and timelier view of credit risk under a proposal made on Thursday by the U.S. accounting standard setter. Its chairman said the new standard might force banks to boost loan-loss reserves by 50 percent.
In the wake of the 2007-2008 credit crisis that jolted world markets, the Financial Accounting Standards Board has been studying ways to get banks to tell the public more about credit losses, both incurred and in the future.
Huge losses on loans and other debt instruments held as investments hammered banks worldwide five years ago in a
crisis that threw the United States into a severe recession.
FASB writes standards for the accounting system used by U.S. companies, the Generally Accepted Accounting Principles, or GAAP. The proposed standard will undergo months of review and, if adopted, probably would not take effect for a year or two.
FASB Chairman Leslie Seidman said on a conference call with reporters that large U.S. financial
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