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If they held the bonds in a trading book which was marked to market the losses had been incurred already as the secondary market price of the bonds dropped. So, reducing the exposure by selling the bonds for cash does not incur an immediate loss and improves liquidity while giving up the possibility of recouping if the value of the bonds rises again.

If they held the bonds in an investment book on hold-to-maturity-accounting, they did indeed realise losses.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed Jun 15th, 2011 at 09:57:31 AM EST
[ Parent ]
Which opens another interesting question: How much of this reduced exposure comes from transfers from the investment portfolio to the trading portfolio of the same bank?

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jun 15th, 2011 at 09:59:11 AM EST
[ Parent ]
No part of it? The figures shown are summaries for private banks resp. insurers in Germany.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Jun 15th, 2011 at 10:05:23 AM EST
[ Parent ]
The "exposures" look like "total principal value". While the market value of some greek bonds has indeed collapesed by 1/2, that's not the case for other countries. So, while you could have "halved your exposure" to Greece by changing the accounting convention from investment to trading, you can't have reduced your Spanish exposure by 1/2 other than by selling (or failing to roll over maturing) bonds.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Jun 15th, 2011 at 10:09:28 AM EST
[ Parent ]

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