Posted on 04/04/2010 3:39:13 PM PDT by Lorianne
US banks earned $2.5bn last year from an accounting rule that enables them to book gains – known as “Christmas capital” – by buying assets at a discount, a new study shows.
More than half of all acquisitions of failed banks last year resulted in such gains, according to SNL Financial, which compiled the data.
“Regulators are trying to get their hands around what is real capital and what is accounting capital,” said one person who has worked on some of these transactions.
In normal bank acquisitions, buyers pay above market prices and record the difference as goodwill, which is written off over time.
The largest beneficiary was United Central Bank of Garland, Texas, which recorded a $271m bargain purchase gain when it bought the assets of Mutual Bank, based in Harvey, Illinois. That gain amounted to 85 per cent of its operating revenue and 96 per cent of its income.
(Excerpt) Read more at ft.com ...
Who remembers ‘regulatory goodwill’ and how that turned out?
I noticed that no banks were shut down on Good Friday.
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