Definition
Window Dressing (Banking)
Window dressing is the temporary improvement of financial metrics around a reporting date to present a healthier picture than the underlying position.
Banks and companies may time transactions to flatter quarter-end or year-end figures, for instance boosting CASA or deposits just before a balance-sheet date, then letting them run off afterward. It distorts the metrics investors rely on.
Regulators counter window dressing by requiring average rather than period-end measures, such as daily average CASA or quarterly average LCR. Analysts compare period-end figures with averages to detect cosmetic improvements that do not reflect the bank's true ongoing position.
Related terms
- CASA (Current and Savings Account)CASA refers to the combined balances in current and savings accounts, which are a bank's cheapest source of funds.
- Liquidity Coverage Ratio (LCR)The Liquidity Coverage Ratio requires a bank to hold enough high-quality liquid assets to cover its net cash outflows over a 30-day stress scenario.
- Deposits (Banking)Deposits are the funds customers place with a bank in current, savings and term accounts, forming the bank's primary and cheapest source of funding.
- Evergreening of LoansEvergreening is the practice of extending fresh loans to a stressed borrower to repay old dues, masking a default and delaying NPA recognition.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.