Dollars and Jens
Tuesday, September 06, 2011
mark-to-market accounting
Josef Ackermann just gave a terrifying speech about the fragility of the Euro banking sector right now.This isn't the first place I've read that. You'll remember that there was some discussion of whether mark-to-market was a mistake three years ago on this side of the Atlantic, or at least whether some debt-like assets should be allowed to stay on the books at a higher value than their market value if there was good reason to believe that the market value was lower for temporary liquidity reasons rather than risk-of-default reasons.
At a conference in Frankfurt he said, "It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels."
I think there was a stronger argument for supposing that the mortgage-backed securities at issue three years ago were going to pay off eventually - not necessarily in full, but by more than their then-market values indicated - than there is today that the sovereign debt is not really risky. But that's just my visceral judgment.
Labels: capital requirements
