* Banks' disclosures to investors too patchy
* Banks must say why won't write down pressured debt
* ESMA to study 2012 bank reports for improvements
By Huw Jones
LONDON, July 26 The European Union's market
regulator on Thursday criticised banks for painting an
incomplete picture of their Greek debt holdings last year when
they and the Greek government were negotiating a big writedown
on the country's bonds.
With the banking sector still shunned by investors and
struggling to restore confidence after a slew of government
bailouts, the watchdog also faulted banks for giving the media
and analysts key information on Greek exposures which they
omitted from annual reports.
The report from the European Securities and Markets
Authority (ESMA) looked at how 42 financial institutions
accounted at the end of 2011 for their combined 80 billion euros
of Greek debt.
"ESMA is of the opinion that greater emphasis should be put
in the financial statements on the reasons why exposures under
close scrutiny from the markets are, or are not, impaired," the
Euro zone leaders agreed in late 2011 to write down the
value of private sector holdings of Greek sovereign debt as part
of a second bailout. There was a deal with banks in early 2012
to write down the debt by 74 percent.
ESMA said banks surveyed all agreed that Greek debt was
impaired last year, meaning its value should be written down and
a charge taken, but what they told investors varied greatly.
Few banks enabled investors to make a yearly comparison to
assess the real impact of Greek debt on their performance.
The regulator began studying Greek debt disclosures by banks
after International Accounting Standards Board's Chairman Hans
Hoogervorst complained in August 2011 that some lenders were not
booking big enough losses. IASB accounting rules are mandatory
in the EU.
French banks like BNP Paribas were accused at the
time of not fully reflecting lower prices for Greek bonds.
ESMA said details from some banks were given to the press or
analysts but left out of annual reports "which raises concerns
over the quality of the financial statements and the consistency
of the communication by issuers of financial matters."
Many banks said they held credit default swaps (CDS) on
Greek debt, a form of insurance in case the country went bust,
but it was hard to see if the banks were buyers or sellers of
CDS and what their impact was on the bank's results.
Only half the banks gave details about their non-sovereign
exposures to Greece, with only two showing impairment on
sovereign debt from Portugal, which also needed an EU bailout.
Reuters reported on Tuesday that Greece is unlikely to pay
what it owes and further debt restructuring is likely to be
necessary. Government debt in Spain, Italy and other euro zone
countries has been under pressure for months as well.
ESMA, made up of securities regulators from the 27-country
bloc, plans to review 2012 annual reports to see how banks have
accounted for the writedown on Greek debt.