WASHINGTON - Federal bank regulators on Friday hammered an accounting trade group's proposal to severely restrict banks' loan-loss reserves, claiming it would mask institutions' true financial condition.

In a letter to the American Institute of Certified Public Accountants, the regulators requested a meeting to discuss the proposal and said the draft "will result in information that is misleading to users of financial statements, including both investors and regulators, and therefore will not improve financial reporting."

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