With a congressional hearing scheduled on loan-loss reserves Wednesday, the impact of an article issued two months ago by regulatory accountants is still under debate.

Published in April, the article was supposed to clarify two existing loan-loss rules-one written in 1975, the other in 1993.

The little-noticed guidelines became controversial in May when the Securities and Exchange Commission announced that banks should heed it.

House Banking's financial institutions subcommittee plans to focus on the SEC's actions during the hearing. Several lawmakers have openly questioned the SEC's position on the loan-loss reserve issue, its decision to endorse the Financial Accounting Standards Board article, and its announcement that banks needing to adjust their reserves to conform with the FASB article should do so on their next quarterly financial statement.

"The FASB article, and the accompanying SEC cover letter, appeared to have produced confusion and concern from the banking regulators," wrote subcommittee chairwoman Rep. Marge Roukema, R-N.J., in an invitation letter to SEC Chairman Arthur Levitt Jr. "What steps has the SEC taken ... to resolve the confusion?"

Not everyone believes the FASB article will require many banks to change their reserving practices.

"It is expected that changes in allowance levels, if any, as a result of the (FASB) article will be substantially limited," according to the Federal Reserve Board's May 21 guidelines for state member banks.

"We don't believe the FASB article would result in any material changes for most banks," said Kevin Bailey, deputy comptroller for core policy at the Office of the Comptroller of the Currency.

But even these regulators are concerned that the industry will overreact out of fear of the SEC.

"What you worry about is a banker saying, 'Gee, I've been hearing for months about this issue, and why would they be saying this if they didn't want me to be lowering my reserves?'" said Christie A. Sciacca, associate director for policy at the Federal Deposit Insurance Corp.

Last fall the SEC delayed SunTrust Banks Inc.'s acquisition of Crestar Financial Corp. until Atlanta-based SunTrust agreed to restate its 1994-96 earnings and cut reserves by $100 million. Since then, it has aggressively lobbied banks to reserve conservatively and avoid managing earnings.

The American Bankers Association contends the FASB article strays from current bank practice.

The FASB article said that if a bank sets aside a reserve for a particular loan, it may not also include that loan when setting general reserves.

In a May 12 letter to the SEC, Donna Fisher, ABA's director of tax and accounting, said the FASB misread the current rules. The rules "clearly indicate that allowances calculated" under the two rules are "complementary to one another, rather than mutually exclusive," she wrote.

"I don't think it is double-counting," she said in an interview.

Ms. Fisher's letter also complained that the "article implies a degree of computational specificity that does not appear in current practice. While banks do document their reserving practices, reserves are not and cannot be statistically derived in the fashion implied."

David Gibbons, deputy comptroller for credit risk at the OCC, agreed.

"I think there's a level of precision and perfection being sought without due consideration of the ramifications," he said. "And the potential ramifications of this being misinterpreted or misapplied could end up a substantial cost to taxpayers."

Ms. Fisher also said the FASB failed to clarify the question of whether or not banks may reserve for losses that are likely to occur in the future.

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