European Banks Water Down Greek Bond Losses

By:  Bruce Walker
08/31/2011
       
European Banks Water Down Greek Bond Losses

In banking, few values count more than consistency and integrity. The sovereign debt crisis in Europe, however, appears to have watered down those values in the case of some banks. The International Accounting Standards Board has stated that some European banks used the value provided by the Greek government in determining how much value Greek bonds should be counted in the assets of the bank. That would mean the bonds would be worth about 21% less than  than the original valuation. 

Those bonds on the open market, IASP Chairman Hans Hoogervost wrote in a letter to the European Securities Markets Authority — the organization responsible for regulating securities valuation — have much lower values than that. “This is a matter of great concern to us” the August 4th letter, which was made public on August 29th, warned.  “It is hard to imagine that there are buyers willing to buy those bonds at the prices indicated by the valuation models being used.”

In banking, few values count more than consistency and integrity. The sovereign debt crisis in Europe, however, appears to have watered down those values in the case of some banks. The International Accounting Standards Board has stated that some European banks used the value provided by the Greek government in determining how much value Greek bonds should be counted in the assets of the bank. That would mean the bonds would be worth about 21% less than  than the original valuation. 

Those bonds on the open market, IASP Chairman Hans Hoogervost (photo) wrote in a letter to the European Securities Markets Authority — the organization responsible for regulating securities valuation — have much lower values than that. “This is a matter of great concern to us” the August 4th letter, which was made public on August 29th, warned.  “It is hard to imagine that there are buyers willing to buy those bonds at the prices indicated by the valuation models being used.”

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