Regions Bank executives could come under fire if an investigation by the bank’s own board finds that they shielded bad loans from investors and the public for too long amid the financial crisis.
Citing a report from The Wall Street Journal, financial blog The Street says the execs came under scrutiny after the Federal Reserve raised concerns about the bank practices and people within the company. The Regions Financial audit committee is trying to find out whether top dogs at Regions delayed the relabeling of loans that were likely not going to be repaid:
Investigators are looking at so-called extend-and-pretend cases, in which a bank gives a borrower more time and delays reclassifying a souring loan, the Journal explained, as well as at “troubled-debt restructurings,” where a bank breaks up a nonperforming loan and labels a portion of it as performing, the newspaper said.
According to the Baton Rouge Business Report’s daily web headlines, bad loans force banks to move more money to cash reserves, thus lowering their profit margins.
Regions, the 12th largest bank in the country and the only one of its size still receiving government assistance stemming from the recession, may also be on the verge of a $200 million settlement with the SEC to answer to civil charges of “defrauding investors in subprime securities,” The Street reports.
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