Bank of America and Citigroup questioned by SEC over repo accounting

21 July 2010

Bank of America and Citigroup are among two of the firms which have been questioned by the Securities and Exchange Commission (SEC) over their repo accounting practices.

The issue hit the headlines earlier this year when an investigation into the collapse of Lehman Brothers revealed it had hid around $50 billion of debt from its balance sheet by misclassifying repurchase agreements as sales rather than borrowings.

According to a new report by AuditAnalytics, it has now emerged that the SEC has been concerned about the practice for years – questioning 115 different transactions conducted at 102 different institutions since 2004.

Don Whalen, AuditAnalytics.com's director of research, told the Wall Street Journal: "The SEC at least knew of this issue and tried to inquire when they could."

Earlier this year, Dick Fuld, the former chief executive of Lehman Brothers, said that the company and those who worked for it were being "unfairly vilified" for their use of the accounting practice.

By Gary Cooper

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