NEW YORK (

TheStreet

) - The

Securities and Exchange Commission

plans to use its authority to shed light on risk exposure that accounting practices have kept in the dark.

SEC commissioners voted 5-0 on Friday to propose new rules that would require banks to disclose more detailed information about assets and loans. The move comes after criticism of an accounting practice called "Repo 105," which allows banks to move short-term borrowings into special vehicles and mark them as sales instead.

"Under these proposals, investors would have better information about a company's financing activities during the course of a reporting period -- not just a period-end snapshot," SEC Chairman Mary Schapiro said ahead of the vote. "With this information, investors would be better able to evaluate the company's ongoing liquidity and leverage risks."

Repo 105 became a key concern after the Lehman Brothers' bankruptcy examiner came out with a scathing outlining how the practice helped mask the investment bank's risk to counterparties and investors. The SEC,

Federal Reserve

and Treasury Department were unaware of the practice - despite being deeply involved in stress testing Lehman's books for months ahead of its collapse. The practice is said to have been widespread among investment banks, with

Citigroup

(C) - Get Report

,

Bank of America

(BAC) - Get Report

and

American International Group

(AIG) - Get Report

making Repo 105 disclosures after the Lehman report was unveiled.

The examiner, Anton Valukas, was particularly critical of the SEC's role, noting that the agency was Lehman's primary regulator but took little action as the firm sunk into demise.

"The SEC told us that were constantly monitoring Lehman's risk and liquidity," Valukas said before the House Financial Services Committee in April. "But there was little if any actual regulation...The SEC made a few recommendations or directions here and there, but in general it simply collected data; it did not direct action, it did not regulate."

During the Lehman debacle, the SEC was headed by Christopher Cox. Schapiro has tried to take a firmer stance in regulating banks today and punishing them through litigation for the excesses of the past.

Repo 105 is often used as "window dressing" at the end of quarters to mask the amount of outstanding debt for a short period of time. Under the SEC proposal, financial firms would have to disclose the amount of debt outstanding on a daily basis and the maximum amounts of debt oustanding rather than simply reporting end-of-period amounts.

There's nothing illegal about Repo 105, which is authorized under the Financial Accounting Standards Board's rules. Yet it helps to mask the nature of a bank's daily operations, by showing debt as sales in off-balance sheet vehicles, rather than as additional leverage.

During the April hearings over Lehman's failure, FASB Chairman Robert Herz noted that "the accounting guidance for repos has been in place since 1997 and has not been changed significantly over the years." He also said that "from an investor's viewpoint, this obfuscated important risks and obligations," and said the FASB would work closely with the SEC and other accounting boards to determine whether a change in standards is necessary.

--Written by Lauren Tara LaCapra in New York.

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