The folly (via the WSJ)…
The template asked for banks to disclose their “gross” and “net” exposures to sovereign risk in each E.U. country. Most banks’ disclosures didn’t define “gross” and “net” beyond saying that the latter were “net of collateral held and hedges”…
Other banking companies excluded bonds held by subsidiaries. France’s Crédit Agricole didn’t count sovereign debt held by its insurance unit. A Crédit Agricole spokeswoman said the company followed guidance from regulators…
Some banks’ figures also were whittled down by accounting for “short” positions they held in various countries’ debt. For example, if a bank held €100 million of Greek debt and €25 million of short positions in Greek debt, the gross figure was listed as €75 million…
The fallout (via Reuters)…
RTRS-IRISH/GERMAN 10-YR GOVT BOND YIELD SPREAD HITS EURO LIFETIME HIGH OF 374 BPS, 21 BPS WIDER ON DAY
RTRS-PORTUGUESE/GERMAN 10-YEAR GOVERNMENT BOND YIELD SPREAD HITS 353 BPS, WIDEST SINCE MAY 10, 17 BPS WIDER ON DAY
The we-told-you-so sigh — via FT Alphaville, here, here, and here.
Related link:
This Is From The Wall Street Journal – Alea blog