IASB urges Greek-bond writedowns at European banks

Some European banks haven?t sufficiently written down the value of Greek government bonds and other ?distressed sovereign debt? they own, the organization that sets accounting rules in the region said.

Banks and other financial institutions are valuing these bond holdings in a way that, in some cases, reflects internal models instead of market prices, the International Accounting Standards Board said in a letter published on its website today.

?It is hard to imagine that there are buyers willing to buy these bonds at the prices indicated,? the IASB said in the letter, dated Aug. 4 and sent to the European Securities and Markets Authority. ?This is a matter of great concern to us.?

Governments and banks in the 27-nation European Union are negotiating the details of a second international rescue for Greece. On July 21, EU leaders agreed bondholders should contribute about 50 billion euros ($72 billion) to the package. The IASB didn?t name the banks which have incorrectly applied the rules in valuing their bond holdings.

?It is an area that quite clearly needs to be addressed, because historically there has been a perceived lack of consistency? in how the assets are valued, said Bob Penn, a financial regulation partner at law firm Allen