Friday, September 9, 2011

French Banks Fudge Losses on Greek Debt

The French are not the only offenders but apparently are the worst:

Broadly speaking, there seems to be a consensus within countries. British banks were most willing to swallow bad medicine and admit the bonds were worth far less than par value. Some German banks were equally forthcoming, but others were less so. Italian banks seem to have done as little as they could, but did take write-downs. French banks went the farthest to find ways to act as if Greek bonds were just fine.

It is the French securities regulator, the Autorité des Marchés Financiers, whose reaction will matter most. If it forces French banks to change their accounting, it risks incurring the wrath of both the French government and French bank regulators. If it looks the other way and other European securities regulators do nothing, the essential weakness of international standards — a lack of consistent enforcement — will be clear to all.
Or it may not. Although they use similar names in various countries, the auditing firms are organized as national partnerships. There are efforts within the firms to assure consistency across borders, but in the end it is the French partnership — which is no doubt quite aware of what the French government wants — that decides what it will allow French companies to do.

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