The board of Regions Financial Corp. is investigating whether bank executives delayed public disclosure of soured loans during the recession, the Wall Street Journal reported Monday.
The Journal quoted court documents and people familiar with the matter indicating that investigators are looking into so-called extend-and-pretend cases where a bank gives a borrower more time and delays reclassifying a troubled loan.
The bank’s audit committee began the probe after the Federal Reserve expressed concern about past practices at Regions, according to documents in a new investor lawsuit against the bank.
Regions, which operates the third largest bank in Chattanooga, is the largest U.S. bank that has not yet repaid the federal government for loans made during the financial crisis. Regions still owes $3.5 billion in government bailout aid.
The Journal also reported Monday that the charges against Regions’ investment company, Morgan Keegan & Co., could result in penalties of up to $200 million.
The SEC claims investors were defrauded with subprime securities.
Regions’ stock fell Monday by 9 cents per share to $6.05.
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