Largest US banks concealed their risks contributing thus to the crisis

According to some data from the Federal Reserve Bank of New York, major US banks temporarily reduced their debt levels just before reporting in the past five quarters. That’s why these banks’ balance sheets appeared to be less risky.

The banks, that have become more vulnerable and more sensitive about showing high levels of debt and risk due to the credit crisis, worried their stocks and credit ratings could be punished.

The Wall Street Journal said on Friday that 18 banks, such as Goldman Sachs Group, Morgan Stanley, J.P. Morgan Chase, Bank of America and Citigroup, understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each period.

The banks had increased their debt in the middle of successive quarters. Excessive leverage by the banks was one of the causes that led to the global financial crisis in 2008.