Esma criticises treatment of Greek bonds

Financial Times
November 25, 2011

The European Union markets regulator has criticised the way that some banks and insurers booked relatively small losses on their Greek government debt holdings earlier this year.

The European Securities and Markets Authority on Friday argued that some financial institutions had taken an inappropriate approach to valuing these securities in their results for the first half of 2011.

In its first meaty pronouncement on the politically-sensitive topic, it sided with those companies that had taken “haircuts” of about 50 per cent on billions of euros of Greek sovereign bonds classified as “available for sale” under accounting rules.

At the same time, it disagreed with other financial institutions – including major French banks – who had only taken a 21 per cent first-half loss on these bonds after using a so-called “level 3” valuation model.

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