of requiring banks to use one set of accounting standards for call reports and another for annual reports. The Federal Financial Institutions Examination Council voted this week to mandate the use of generally accepted accounting principles for bank call reports, starting in the first quarter of 1997. Banks currently use "regulatory accounting principles," or RAP, for call reports. Regulatory accounting had been more lenient than GAAP, but in 1989, Congress mandated that RAP be at least as stringent. Since then, regulatory agencies have toughened RAP in a number of areas. While banking industry representatives applauded the regulators' decision, they noted that the exam council may still mandate additional disclosures to compensate for information that would be lost by the move to GAAP. "This is a real opportunity to reduce burden, but it's really just the beginning of a process," said Diane Casey, national director of regulatory issues at Grant Thornton, an accounting and consulting firm. The supervision task force will "recommend alternative methods of ensuring that we continue to achieve important supervisory objectives," wrote Comptroller of the Currency Eugene A. Ludwig in a letter sent to the other regulators on the exam council. Some bankers are concerned that these "alternative methods" could entail burdensome reporting requirements in the form of supplements to the GAAP call reports. "In theory it sounds great, but if I go to GAAP and still have to fill out all these supplemental schedules, I'm not so sure that's relief," said David M. Morris, senior vice president at Chase Manhattan Bank. Mr. Ludwig said he was "concerned that the supervisory ramifications of this proposal are far from clear." One of the comptroller's major concerns is the difference between the way the two sets of accounting standards address loans sold with recourse. Unlike the regulatory rules, GAAP does not require such sales with recourse to be backed with capital. The Comptroller's office is worried that simply doing away with regulatory accounting principles could lower capital requirements on loans sold with recourse to dangerous levels. Susan Krause, senior deputy comptroller for bank supervision policy, said that such concerns may result in supplemental reporting requirements, but that overall, banks will face less burden under GAAP call reports.
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