Tuesday, August 30, 2011

Banks criticised over level of Greek writedowns -FT

LONDON/PARIS: Some European financial institutions should have taken bigger losses on their Greek government bond holdings in recent results announcements, the International Accounting Standards Board (IASB) said in a letter to the EU market regulator, according to the Financial Times on Tuesday, Aug 30.

The IASB, the rules setter that is aiming to become the global benchmark for financial reporting, criticised the inconsistency in the way banks and insurers wrote down the value of their Greek sovereign debt, the newspaper said.

The private letter, addressed to the European Securities and Markets Authority, did not single out particular countries or banks, it said.

However, the letter did reflect specific concerns over the approach taken by France's biggest listed bank BNP Paribas and insurer CNP Assurances -- both of which used their own models to value their holdings rather than market prices -- according to an unnamed source cited by the FT.

A BNP spokeswoman said: "BNP took provisions against its Greece exposure in full agreement with its auditors and the relevant authorities, in accordance with the plan decided upon by the European Union on July 21."

A CNP spokeswoman declined to comment.

European banks taking a 3 billion euro ($4.2 billion) hit on their Greek bond holdings earlier this month employed markedly different approaches to valuing the debt.

The writedowns disclosed by the banks in their results varied from 21 to 50 percent, showing a wide range of views on what they expect to get back from their holdings of Greek debt.

Using the most aggressive markdown approach -- namely marking to market all Greek sovereign holdings -- would saddle 19 of the most exposed European banks with another 6.6 billion euros in potential writedowns, according to Citi analysts.

BNP would take the biggest hit with 2.1 billion euros in remaining writedowns, followed by Belgium's Dexia with 1.9 billion and Germany's Commerzbank with 959 million, Citi said.

The European Commission said on Monday that there was no need to recapitalise the banks over and above what had been agreed after a recent annual stress test. - Reuters

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