By Dave Clarke
WASHINGTON (Reuters) - Securities regulators voted unanimously on Friday to propose rules for companies to disclose more information about their short-term borrowings.
The agency is trying to crack down on financial companies that use accounting gimmicks to bolster their balance sheets, particularly at the end of a quarter.
Under the proposal, companies would disclose such things as the average interest rate on their borrowings rather than just a snapshot of their financial positions before the end of a filing period. It also would require companies to report the maximum amount they had outstanding during a reporting period.
The rules differentiate between companies that are financial in nature and other companies. Financial companies would have to disclose the maximum amount outstanding daily.
"Under these proposals, investors would have better information about a company's financing activities during the course of a reporting period -- not just a period-end snapshot," said SEC Chairman Mary Schapiro. "With this information, investors would be better able to evaluate the company's ongoing liquidity and leverage risks."
Bank of America, Citigroup and American International Group Inc have disclosed that they classified billions of dollars in loans as sales in 2009, which had the effect of masking their risk levels.
The firms made the disclosures to the SEC this year after concerns arose about their repurchasing agreement accounting.
Repurchase agreements, or repos, are a form of financing that allows a borrower to opt for cash loans once they have given financial securities to the lender as collateral. The borrower would then buy back the collateral from the lender at a later date to close out the loan.
Classifying repo transactions as a sale instead of showing them as borrowings masks the leverage position of a company as the assets would be removed from the balance sheet.
(Reporting by Dave Clarke. Additional reporting by Rachelle Younglai. Editing by Robert MacMillan)
