Fair value

: the Greek sovereign debt within the French banking sector

Abstract

The core topic of this dissertation encompasses the impacts, magnitudes and possible treatments of Sovereign Debt valued at Fair Value within financial institutions. The European Sovereign Debt Crisis had heavily affected the economic and financial environment and consequently, the banking sector is facing some challenges to handle it. The accounting treatment and classification of Sovereign Debt is under the scope of IAS 39 – Financial Instruments, Recognition and Measurements. Considering this scenario, the purpose of the case is to understand the effect of the Greek Sovereign Debt crisis in the three most exposed French banks. Actually, the critical theme is to apprehend how each bank embraced the international accounting standards and the fair value concept in their financial statements. The different adoptions taken by banks are justified by the prudential ratios that banks are compelled to achieve, under the strictly regulated banking environment. All in all, from my analysis and considering that the three banks are under the same supervisor, and from the same country, Greek Sovereign Debt was classified under three different captions and almost in its entirely according to internal models - Fair Value Level 3. Notwithstanding, the mark-to-market approach is indeed the best solution for the financial sector, but regulators and standards policies must unravel the current shortfalls, under more mandatory disclosures, guided and exhaustive standards and stricter capital requirements in order to restore market’s confidence and reach a healthy banking sector.

Date of Award	17 Sept 2012
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Paulo Azenhas (Supervisor)