Greek debt provisions questioned
Some European banks and insurance groups booked insufficient writedowns on Greek government bond holdings this year, the International Accounting Standards Board (IASB) said on Tuesday.
IASB found inconsistencies in how financial institutions wrote down the value of the Greek debt in 2011 second-quarter results, in view of the forthcoming bond rollover.
In July, EU leaders agreed that bondholders should contribute about 50 billion euros to a second international rescue package for Greece.
In a letter sent to the European Securities and Markets Authority (ESMA), dated August 4 and published yesterday, IASB noted that some companies valued these bond holdings in a way that reflected internal models rather than market prices. ?This is a matter of great concern to us,? said IASB President Hans Hoogervorst.
IASB-related sources said some groups booked provisions valued at up to 51 percent of their Greek bond portfolio, while others only 21 percent, in line with the EU aid plan for holdings that mature by 2020.
The letter did not mention specific names, but a source said the letter reflected concern over the policies applied by France?s BNP Paribas and CNP Assurances, which had announced writedowns of 21 percent in the value of their bondholdings, while by contrast, the Royal Bank of Scotland booked a 51 percent provision.
The two French groups dismissed suggestions that the provisions had been insufficient.
Separately, sources of the Greek Debt Management Agency said that everything will be ready by September 9 to launch the largest rollover of sovereign debt ever. Banks will have to notify of their participation within the next 10 days. The participation of Greek financial institutions does not exceed 30-35 percent of the total package.
Fitch Ratings said in its latest report on the eurozone that market confidence remained elusive for Greece, although it acknowledged that investors? anxieties were largely quelled by the July, 109-billion euro package for Greece. The rating agency has said that the participation of private bondholders in the package would amount to a restricted default event. Also, that the cut in the interest rates of the EU loans to Greece and the rollover open for a window of opportunity for this country to regain its credibility.
