The compulsory adoption of International Accounting Standards (IAS) by all European Union businesses in preparing their consolidated financial statements for the year 2005 poses a special challenge to Greek banks because they will have to reveal the full extent of their liabilities to employees’ pension funds. Under current rules, banks are obliged to reveal the amount they spend on pensions, lump sum retirement payments and severance compensations in a given year but not their future obligations to their employees. Since IAS make the latter a mandatory element of their financial statements, banks must commission studies to estimate future liabilities for all employees and make a concrete provision against the liabilities. However, in the first year of application of IAS, banks are allowed to book this obligation directly under liabilities (without affecting results), thereby reducing net worth. Bank officials recognize the issue of social security liabilities as one of major importance, which must be tackled urgently. Nevertheless, they insist that the booking of these liabilities will not present any serious problems, at least for the biggest of them; several of them have already made substantial preparatory steps, and IAS affords them the opportunity for the liabilities to be offset by value readjustments in real estate property items. To be sure, the introduction of IAS is of concern to banks everywhere in Europe, and the solutions currently being pursued, in a concerted fashion, for complicated points are expected to show the way for Greek banks as well. At any rate, the exact level of social security liabilities cannot be calculated with any accuracy. The picture is expected to start clearing in just over a year’s time, when it will be possible to compare the first quarterly results of 2005 with this year’s first quarter. Alpha Bank, the country’s second largest, has provisionally calculated its social security liabilities at 136 million euros, booking them against earnings. Officials of the National Bank, the largest, appear confident that its value readjustment of about 1,500 property items this year will offset any negative accounting impact of such liabilities. The degree of uncertainty appears greater in the Agricultural and Emporiki banks. In the latter’s case, the issue has delayed an expansion of a strategic alliance with France’s Credit Agricole, which is demanding the situation be cleared up.