WASHINGTON U.S. regulators plan to gauge how severe a hit banks will take from an accounting change that will force them to bring more than $1 trillion of assets back on their books, the Federal Deposit Insurance Corp proposed on Wednesday.
The FDIC voted to seek input on whether banks need more time to build capital cushions against the assets that were once held by off-balance-sheet trusts.
The accounting change requires that banks move those assets back on to their books on January 1, 2010, in an attempt to bring more transparency to banks' financial statements.
"I think it's very appropriate that we're asking the question should we phase this in over time or not," said Comptroller of the Currency John Dugan.
"Some type of transactions may require a different type of capital treatment than others," Dugan told the meeting of the FDIC board.
Banks have used off-balance sheet vehicles to avoid reporting requirements or to reduce the amount of capital they needed to hold to offset risks.
Banking regulators are worried about how current capital requirements would work with the accounting change.
Earlier this year, the Financial Accounting Standards Board decided to eliminate a concept known as the "qualified special purpose entity" that banks have used to keep assets such as mortgage-backed securities off their books.
FDIC Chairman Sheila Bair said regulators needed more information about how the accounting change could affect securitization markets and loan modifications.
(Reporting by Karey Wutkowski and Steve Eder; Writing by Rachelle Younglai; Editing by Simon Denyer)