Bloomberg News

Fitch Says Erste’s CDS Accounting Wasn’t Standard Practice

October 14, 2011

(Updates with Fitch statement in third paragraph.)

Oct. 14 (Bloomberg) -- Erste Group Bank AG’s revised way of accounting for credit-default swaps is already standard practice elsewhere, Fitch Ratings said today.

Erste on Oct. 10 said it would categorise CDS it has sold as derivatives because changes in accounting standards made it impossible to keep them in its books as financial guarantees. That change means that it must account for them at market prices, which created a 180 million-euro ($249.5 million) loss this year, the lender said.

“The practice of accounting for CDS as derivatives and therefore marking them to market is well established across Europe,” Bridget Gandy, co-head of Fitch’s European banks division, said in a statement today.

Accounting and disclosure rules and conventions have become one of the areas under scrutiny of investors and supervisors in Europe’s debt crisis. The head of Europe’s markets regulator last month warned banks to be consistent in their valuations of sovereign debt, likening the lack of transparency about banks’ individual holdings of government debt to the sub-prime mortgages that triggered the credit crisis.

--Editors: Peter Chapman, Anthony Aarons

To contact the reporter on this story: Boris Groendahl in Vienna at

To contact the editor responsible for this story: Angela Cullen at

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