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Friday, March 29, 2024

Latest Stress Test Rumor: 23% Haircut On Greek Debt… Held In Trading Books

Courtesy of Tyler Durden

Another day, another accounting debauchery by Europe. In the latest development, Reuters reports that as per the recent JPM “suggestion” posted previously on Zero Hedge, Greek debt is now expected to be haircut by 23%, or to reflect current market prices. Allegedly this is yet another failed attempt to restore some confidence in the entire farcical process. There is, of course, one caveat: the haircut will only pertain to trading books. In other words this is Europe’s equivalent of FASB 157: everything that banks hold “to maturity” will not see a major haircut, and very likely not see any haircut at all. Which simply means that all European banks that hold such debt will merely reclassify their Greek exposure from trading to a “held to bankruptcy at par” category. The surreality of European banking assets (which as we pointed out previously is a $100 trillion circle jerk where one bank’s assets are another bank’s liabilities) has now passed well into the twilight zone. But never fear, the ECB is here. Which begs the question: will JC Trichet’s books also be exposed to some sort of stress test? After all Europe’s central bank is on the hook for over $1 trillion in impaired debt now – does this mean the central bank will in no way be subject to any haircuts or other viability tests? Why of course, how else will flagrant lies about financial system’s stability be perpetuated for at least one more year.

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