Italy suspends mark-to-market accounting on eurozone bonds

The Bank of Italy Tuesday said Italian lenders holding European government bonds in their available-for-sale portfolio don’t have to take into account possible capital gains or losses on them, in a move to safeguard capital ratios.

The decision came after volatility on European government bonds skyrocketed in recent weeks following several rating agencies downgrades, temporarily affecting the capital ratios of Italian, as well as other European, banks.

According to Italian securities laws Italian banks must deduct all the losses linked to the value of those bonds, but can only partially book capital gains.

Webmaster's Commentary: 

Mark-to-market accounting was what allowed ENRON to post profits that did not actually exist in order to run up their stock prices.

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