The one-time spike in charge-offs, which was recently seen in the credit card trusts of both Providian Financial Corp. and MBNA, should be the last such incidents caused by a change in accounting rules effective Dec. 31, 1999, according to Vernon Wright, vice chairman and chief corporate finance officer at MNBA.

Last year, issuers with credit card portfolios, including First Union, Bank One, and Capital One, all experienced similar events, Wright said.

"This is the last piece of it," Wright added. "No more surprises going forward."

In 1999 the Federal Financial Institutions Examination Council (FFIEC) established guidelines requiring banks to recognize a charge-off if an account is delinquent 60 days or more, according to published reports. These changes in accounting were to be implemented by Dec. 31, 2000.

MBNA Credit Card Mast Trust II's charge-offs increased by more than 500 basis points, which squeezed the excess spread to nearly zero for certain series off MT-II, according to research reports.

Providian reported a $3.2 million in charge-offs associated with the change in accounting.

Since credit card debt is unsecured, issuers must write down the full amount of the debt, compared to secured loans, such as mortgages, where a certain recovery level is assumed. In the case of mortgages, the loan servicer will get something back following a foreclosure.

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