"Deferred tax assets" may be the next accounting procedure to hurt banks' bottom lines — and force them to raise capital.

When banks are operating in the black, deferred tax assets accrued in the past offset current income, acting as a tax deduction to ultimately reduce taxes. Such assets are created when a bank's profit for financial accounting has been lower than the pretax income reported to the government. For example, loan-loss reserves or mark-to-market writedowns on securities hit earnings in the quarter taken, but do not affect pretax income because they are not reported to the Internal Revenue Service until the loss actually occurs.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.