Ruben Vidaurreta

 

357L

 

D. Hertzberg and S.K. Witcher, "Manufacturers Hanover Assesses Argentine Loans," Wall Street Journal, 6/19/84.

Federal bank regulators issued clarifications of accounting rules that will affect the way banks handle unpaid interest on certain loans.  “This statement comes amid growing pressure for banks to take more conservative accounting positions with regard to bank’s Latin American debt.”  Big banks and especial Manufacturers Hanover have been subject to much speculation by investors after growing skepticism about the quality of their Latin American loans.  Manufacturers Hanover has said that they have already begun to take measures in the, “unlikely,” event of continuing nonpayment of interest.  If Argentina does not pay back its interest by the due date the bank will have to make a $35 million (or a 37%) reduction in earnings.  If interest payments are not made by Argentina in 90 days the Argentine loans would be classified under non accrual status in the accounting statements.  A bank must subtract no accrual amounts from current income earning reports.  The bank said that in the event that Argentina cannot make its payments, the percentage of loans in non accrual status would only be about 3% of total loans, which it claims is comparable to that of other banks.  The clarification by federal regulators is a warning to banks saying that they should be more careful in assessing the repayment of their loans.