The Federal Deposit Insurance Corp. is warning banks not to use the so-called "Rule of 78s" accounting method when reporting interest income on call reports for loans originated after Jan. 1.

"The Rule of 78s normally should not be used to report interest income in the quarterly Reports of Condition and Income even if it is used for federal income tax purposes," the FDIC said in a letter last week to the chief executives of 6,000 state-chartered banks.

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