Advisor(s)
Abstract(s)
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.