Fair value debate is not something new in accounting science


The fair value debate is not something new in accounting science. The increasing use of fair value accounting came as the fundamental valuation model despite its weaknesses because it appears to live up to the framework criteria, as the accounting setters define, better than any other (for instance historical cost). It is worth to have a glance to the origin of this controversial term at the very beginning.

It is believed, in accordance to the accounting history, that modern accounting has first appeared in the Italian cities of Genoa, Venice and Florence in the 14th century. The earliest description of accountancy was provided by an Italian, Luca Pacioli, in 1494. The first accounting book was one of five sections in Pacioli's mathematics book titled "Everything about Arithmetic, Geometry, and Proportions." (Summa de Arithmetica, Geometria, Proportioni et Proportionalita) in Italian (Venice 1494) (Smith L.M, 2008). A wandering Franciscan friar, tutor and mathematician, known as the father of modern accounting, developed a system for Venetian merchants to track and value their activities in a particular way, to record who owed what to whom. He codified double-entry bookkeeping and since then, accountants and others have been concerned about issues related to the valuation of financial statement components (Emerson, Karim, Rutledge, 2010)

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By the early 20th century fair value principles were applied to majority of companies and accurately to banks. However, after World War I, the unrestrained and excessive bloom of capital markets contributed to the well-known 1929 stock market crisis and showed the failure of a great number of US banks. A conflict commenced among credit institutions, state and regulators how to treat the assets. The effect of that condition was the first endeavours for accounting standards. They began after 1930 in United States of America initially by the new-established SEC (Securities and Exchange Commission) to end up amongst others to FASB (Financial Accounting Standards Board) in July 1973. The latter is still today the main organisation of accounting standards in the U.S. which develops and interprets standards under the US GAAP (Generally Accepted Accounting Principles) authority.

Whilst in the U.S., the accounting principles were in force steadily since 1934, the rest of world applies mostly local standards, depending on the political system, growth, tax regulation and the needs of respective country generically. Strong economically countries such as Canada, Australia, United Kingdom, Japan, Germany, France and others sponsored a committee named International Accounting Standards Committee-IASC. Following the American organisational structure it changed itself and in 2001, was renamed to International Accounting Standards Board-IASB (Kontos, 2007). After many years' efforts, global financial reporting has moved from a position of numerous disparate national systems to the position at present, where there are essentially only two global-scale systems of financial reporting, IFRS and US GAAP (Ernst&Young, 2007). The United States led the way to the application of fair value and the official primary attempt was the appearance in December 1991 of SFAS 107 (FASB, 1991). The Financial Accounting Standards Board sought to make financial statements easier to compare and balance sheets more reflective to real values. After the requirement of US companies to disclose fair value, FASB obliged institutions to publish the fair value of all their financial instruments in notes to the financial statements. A developed standard in 1993 was adopted by FASB (SFAS) 115 ''Accounting for Certain Investments in Debt and Equity Securities'' (FASB, 1993). SFAS 115 obliged institutions to use fair value model of some of their securities on the balance sheet and also on profit and loss statement. Because of the restrictive rules on that standard and concerns by banking sector in September 2006, FASB released FAS 157 in order to provide accountants and preparers with a clear image on how fair value was supposed to be treated and disclosed. Prior to FAS 157 standard, the methods for measuring fair value were various and incompatible, especially for items that are not traded in an active market. FASB formally addresses in its exposure paper the basic reason for issuing this statement ''prior to that statement there were different definitions of fair value and limited guidance for applying those definitions in GAAP'' (FASB 157 p.2, 2006).

While the standards have been criticised by the banking sector and banking supervisors, in Europe and elsewhere in the world, in 1988, the International Accounting Standards Committee (IASC) began a project to develop a comprehensive International Accounting Standard (IAS) on accounting for financial instruments. Financial instruments include cash, like accounts, notes, and loans receivable and payables like investments in stocks, bonds, and other securities as well as derivatives such as options, warrants, futures contracts, forward contracts, and swaps (Deloitte Touche Tohmatsu, 2001). It took 10 years to be developed and IASC joined officially with the fair value (aka mark-to-market) trend in 1998 with issuing of an accounting standard named IAS 39 [1] . IAS 39 was IASC's most complicated standard. It passed through three exposure drafts and an issue paper that contained additional proposals. This standard, which had particular impact on financial institutions, was criticised and considered as premature. It took effect in 2001. At the end, all initiatives by both IASB and the US GAAP have increased the use of fair value accounting for financial reporting across the world.

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This paper seeks to deal with the standards by IASB which are applied in Europe and not those by FASB, but to have a clearer image it is worth to see the scope of each principle.

Fair value under IAS 39 against SFAS 157

SFAS 157 details the framework for measuring fair value for firms reporting their financial statements based on US GAAP .The standard defines in paragraph 5: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This definition focuses on the price that would be received to sell the asset or paid to transfer the liability ("exit price"), not the price that would be paid to acquire the asset or received to assume the liability ("entry price").

SFAS 157 declares three valuation techniques to estimate fair values. The market approach, income approach and/or cost approach. In market approach, quoted prices in active markets are used. Income approach converts future amount (cash flows or earnings) to a single present value amount when cost approach is based on the amount that would be required to replace the service capacity of an asset. Also the standard establishes three levels structure known as '' fair value hierarchy''. Level 1 is the present price in a liquid market for exactly the same financial instrument, Level 2 present price in a market for a similar instrument which can be adjusted to obtain the fair value of the instrument being valued and in Level 3 some valuation models are used based on assumptions that a participant would price the assets and liabilities. Level 3 should not directly use the entity's own assumptions without modifying them to reflect the market.

The standards under IASB associated with financial instruments are addressed into three standards: IAS 32 deals with distinguishing debt from equity, IAS 39 contains requirements for recognition and measurement and IFRS 7 with disclosures. The controversial is IAS 39 and this is against the respective US one.

In contrast to SFAS 157, IAS 39 defines fair value slightly differently. It is originally based mostly in FASB's standard. The objective of IAS 39 is to establish principles for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non financial items. Arguably, this establishes rules rather than principles (Ernst & Young, p.166, 2009). Fair value is defined as '' the amount for which and asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm's length transaction'' (paragraph 9).

The standard is basically applied to all financial instruments that are assigned to the scope of application of IAS 39 (KPMG, 2006 p.9). Financial instruments are classified into four categories where each one has different accounting consequences.

This categorisation is set out in paragraph 9 of IAS 39.

Financial instruments at fair value through profit or loss

Held-to-maturity investments

Loans and receivables

Available-for-sale financial assets

Note that only the first category is applicable to both assets and liabilities. All the other categories apply to financial assets only (Ernst&Young, 2009).

Those categories are used to find out how an exacting financial asset and liability are recognised and measured in the financial statements (Deloitte, 2010).

The category of at fair value through profit or loss (assets) has two sub-categories for each asset and liability:

Assets at fair value through profit or loss:

Designated includes any financial asset that is designated on initial recognition as one to be measured at market value with fair value changes in profit or loss flow directly through the income statement.

Held for trading includes financial assets that are held for trading. All derivatives [2] and financial assets acquired or held for selling purpose in the short term or for which there is a recent prototype of short-term profit taking are held for trading.

About financial liabilities IAS 39 recognises two classes:

Financial liabilities at fair value through profit or loss and other liabilities measured at amortised.

The category of financial liability at fair value through profit or loss has two subcategories:

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Designated - A financial liability that is designated by the entity on initial recognition as a liability at fair value through profit or loss.

Held for trading - A financial liability classified as held for trading, such as an obligation for securities borrowed and which have to be returned in the future.

The first classified assets are measured at fair value and this includes all derivatives and changes flow directly through income statement. Held to maturity investments at amortised cost [3] , loans and receivables too. The latter may not include derivatives nor be quoted on an active market and use the effective interest rate method. Available for sale assets at fair value but the change in fair value goes to equity and is reported in other comprehensive income with gains and losses recycled through the income statement when the asset is sold. A key requirement is that an entity should settle on in early point onto which category the asset will be located and may not reclassify it.

Financial turmoil obliged the IASB to make some amendments to IAS 39. On the following section is presented the need for amendments and the impact they had.

The impact of Financial Crisis requires amendments by Standard Setter

Banks and credit institutions lobbied the organisation setter to go through these amendments due to the insufficiency of liquidity in financial markets. Some assets were largely traded in active markets but could not be so traded any longer at amortised cost.

In Europe politicians have got influence over the IASB. Prior to go into effect a new IASB standard, it must be approved by three EU bodies - the Accounting Regulatory Committee (ARC), European Financial Reporting Advisory Group (EFRAG) the Committee of European Securities Regulators (CESR) (Kontos, 2007). Due to this reliance, the IASB is highly susceptible to threats by politicians. They are able to legislate by themselves accounting standards for European companies.

In mid-2008 European banks lobbied politicians to force the IASB's hand. The leaders of the EU have pushed hard to suspend the application of fair value accounting throughout the financial meltdown. President Nicolas Sarkozy (France) in his speech on 30 September 2008 who held the presidency of EU stated that "Financial companies were forced to value assets at market price, which rises and falls on the whim of speculators'' [4] . He proposed to the European Commission to ease companies' third-quarter balance sheet losses. By October 2008 (IASB, 2008), EU urgently requested the IASB allows European banks to reclassify their assets from the categories of trading or available or held for sale to the held-to-maturity category - in other words, from fair value accounting to the traditional cost accounting (historical). In its rush to meet this request, the IASB put aside its normal due process and the crisis made it to accelerate the timeline for the sweeping amendments (Deloitte, October 2008) and issued the exposure draft to its accounting standard.

The amendments allow European banks to reallocate their bonds and marketable loans from a fair value category to a historical cost category under "rare circumstances." The IASB announced the interpretation of rare circumstances, declaring:

"The deterioration of the world's financial markets that has occurred during the third quarter of this year is a possible example of rare circumstances."(IASB, 13 October 2008). This IASB amendment had an immediate impact on the financial statements of European banks. A survey held by CESR in July 2009 to analyse the application of amendments in terms of reclassification applied, gave the following outcomes.

68% of the FTSE Euro top companies used the option to reclassify in the annual financial statements for 2008 compared to only 36% in the interim financial statements for the 3rd quarter of 2008. In addition, the body stresses:

''The impact of the reclassifications was positive on the profit and loss account and on other comprehensive income. If no reclassifications had been made, the total amount reported in the profit and loss account and in other comprehensive income would have been 28 billion Euros lower than the figures actually reported. Three quarters of that amount would have been recognised by the FTSE Euro top companies if they had not reclassified''.

(CESR, p.2, 2009), (http://www.iasplus.com/restruct/euro2009.htm).

Reasons for the financial crisis and the role of banks

The collapse of investment banks was the start of the disaster. What are the main causes and the role of banks? The linkage between the crisis and banks is something absolutely natural. Academics, researchers, accounting firms, credit institutions as well as politicians have given a try to explain the real causes of that phenomenon. The origin of the recession, widely accepted, has its roots in the world biggest economy USA (Tamara Todorova, Associate Professor of Economics) [5] . Consequently, since the colossus has collapsed the implications are being spread to the rest of the world mostly to EU. Origins could be found in both private and public sector. Banks and governments regulate the supply of money in the active markets using the known money multiplier. Jean-Claude Trichet, the president of the ECB stresses, financial evolution and innovation in the past decade had made the economies more productive [6] . All the factors that stimulated the credit and asset price boom, also created the environment for a bust. Among others he mentioned that the start of this turmoil was sudden but not unexpected. The market makes its own circle as a product. The basic reason seems to be the poor credit quality of banks products. But we are first going to look at how the environment became unstable.

Argue that the very loose monetary policy of the Federal Reserve-FED for a sufficient period of time is responsible for the appearance of excessive liquidity and leverage effect, resulting in the emergence of imbalances and eventually the bubble in the housing market. Also, low interest rates and low yields of "traditional investment" led financial market participants in taking high risks through various innovative financial instruments without paying adequate attention to risks. OTD ''originate to distribute'' is a model operated in a way that the banks have incentives to group and securitize individual loans that disposed to investors. The excessive liquidity has led fund managers to take more risks. In their attempt to maximize profits, they have gone to the broad exposure of products that kept off-balance sheets of banks, while those products were widely used for the transformation of portfolio maturity. Banks lend shot-term assets by putting up their long-term assets as collateral. These assets have longer maturities than liabilities and this mismatch between the two of them increase the capital of a firm (William Poole, 2008). The success of this model was based on a supposedly highly sophisticated risk management systems and evaluating these products, and financial institutions from the credit risk rating agencies, while it was obvious that there were many violations of the existing regulatory framework.

Mentioned before the bubble in the housing market and Jose De Grogorio, Governor of the Central Bank of Chile characteristically said that when the bubble burst, the crisis erupted (BIS Review 76/2010). So we arrived in the summer of 2007, which is placed the ''official'' beginning of the crisis. The trend of continuous rise in property prices in the U.S. is accompanied with the market crisis in subprime loans. Many borrowers had no equity in their homes, and the fall in prices put them ''underwater'' because their mortgage balance exceeded the home value, the former vice president of FED O'Driscoll (2009) writes about the origins of crisis. The financial market had started to face problems, as several financial institutions were exposed to complex products, but were rated excellent. Bad supervisory from the authorities in the U.S. allowed the crisis to be spread to the other side of the Atlantic with the first victims of investment banks. Two other events in conjunction with the strategies above came and deteriorated the whole condition: the rise of commodity prices, particularly oil and food prices, and the terrible imbalances caused the housing market not only in the U.S., but in many euro zone countries. Subprime lenders have closed down, stopped lending, or been sold to avoid bankruptcy. Thus, there is no lending among banks due to restricted solvency and markets became illiquid. The balance sheets of financial institutions became loaded by assets that have suffered major declines in value and disappearing market liquidity. Participants are unwilling to transact in these instruments, adding to increased financial and uncertainty [7] . Fair value exacerbate all this circumstances obliging the banks to write off ''bad'' assets on balance sheets at market values.

The figure 1 below demonstrates the real explosion in residential mortgage backed securities (RMBS) after 2004.


Source: OECD, DataStream.

Fair value and historical cost

Benefits as well as drawbacks of fair value have been discussed the recently years by bank regulators, investors and accounting firms. Some argue that fair value despite the weaknesses is the best method to value financial instruments when followed by relevant disclosure. Also it provides early warning signals for an impending crisis and additionally can compel banks to get appropriate measures at an earlier point (Laux, Leux, 2009). In turn, opponents of market value accounting prefer the traditional, principal and seriously considered as an alternative to fair value, historical cost.

Benefits of mark-to-market model

Fair value is considered as a clear concept - simply, the value that a business could get by selling or settling the item at an accurate time. Fair value provides up-to-date information about financial assets and liabilities, consistent with market whereas increasing transparency and encouraging rapid corrective actions. Since fair value reflects current market conditions, it provides comparability of the value of financial instruments bought at different times. In addition, financial disclosures that use fair value provide investors with insight into prevailing market values, further helping to ensure the usefulness of financial reports. (BMA, ISDA, SIA, 2002)

The historical cost regime relies on past transaction prices and as a result accounting values are insensitive to more recent price signals. Fair value measures what a business would get by selling the asset today, whereby historical cost is based on what the business intends to do with the asset, namely, to keep hold of it and receive the interest and if necessary impair the asset. This lack of sensitivity to price signals induces inefficient decisions because the measurement regime does not reflect the most recent fundamental value of the assets (Plantin, Sapra, Shin, 2008).

Accountants from England and Wales point out that under historical cost accounting, derivatives used to be often off-balance sheet. Fair value brought them on the balance sheet. To report these items at historical cost are uninformative but even a subjective fair value measurement is likely to provide a better measure of business performance and balance sheet strength than historical cost (ICAEW, 2009).

On the other hand, financial statements, produced under historical cost convention, provide a basis for determining the outcome of agency agreements with reasonable certainty and predictability because the data are relatively objective. Various parties who deal with the enterprise, such as lenders, will know that the figures produced in any financial statements are objective and not manipulated by likely subjective judgements made by the directors. (B & J Elliott, p.23, 2008). Therefore the traditional regime is reliable. But is it relevant as well? Below a simplified example presents the treatment of historical cost and why it is not relevant.

If a company purchases an asset for 1000 and the estimated depreciation is 100 per year for 10 years time, the cost of asset after the first year will be 900. If the market (fair) value of this asset was 950 after the first year in the market, the company would not write up the asset after that year. Rather, the asset would remain at original cost (historical) less the depreciation until the asset is sold. If the company sells the asset at 950, it is recognised directly realised gains of 50. Hence, investors and users of financial statements understand where the assets are coming from. In terms of the above information reliability, obviously, the historical cost is reliable since everyone can agree on the original price. But reliable does not mean relevant. An asset X purchased, if it is recorded on balance sheet at historical cost, does not reflect the current market price. For this reason, users argue that fair value is more relevant than historical cost.

Readers of financial statements obtain a fairer and truer outlook of a company's financial situation due to fair value that reflects the economic conditions of markets and the nonstop changes in them. The traditional method, on the other hand, shows the market conditions existed when a transaction took place and changes in the price do not appear until asset is sold.

Ms Murrall [8] : Historic cost is an arbitrary point in time. If you record assets at historic cost, accounts will not be comparable. (ICAEW, 2009)

Mark-to-market model is consistent and comparable, because financial instruments are measured at the same time and under the same principle. In accordance to historical cost, users and investors cannot formulate comparisons and if so, difficult to be made. For instance, if two entities hold similar financial instruments, they may show different values if based on the time they have bought them.

The transparency of information given by fair value is another advantage because it is relied on the quoted prices in liquid (active) market. Information based on active market may be verifiable (Krumwiede, p.329, 2008) too. At this point, it is worth to be mentioned that the best indicator to price financial instruments is the quoted market price on an active market. Active market is characterized by quoted prices that are readily and regularly available from exchanges, dealers or brokers. The quoted prices reflect current and market transactions. Bid and ask prices represent proper market prices for assets and liabilities (KPMG, 2006, p.76). Also, it is transparent in the sense that the position- good or bad- of an entity is open to the public.

Some commendable positions in favour of fair value

''why is fair value better method for financial instruments accounting than amortised cost?''

Mr Haddrill [9] : Simply because it is the best reflection you can get of the value at the time rather than the value at the point at which the asset was acquired.

Mr Izza [10] : it has got the news out much faster than other methodologies might have done, leading to speedier actions to deal with the situation.....

(ICAEW, 2009)

Criticism at mark-to-market model

The FVA is under attack for decades and especially the recent years of the credit crisis globally. Many critics are against this convention of measurement. The disadvantages that coincide with FVA have to be taken into consideration, due to the fact that they may influence the financial situation of banking institutions, as it happens in case of the financial crisis in the banking sector worldwide. The mixed attributes model adopted by IFRS and U.S. GAAP has embedded volatility and procyclicality aspects (Novoa et al, 2009). It results in remarkable difficulties for financial institutions due to increased volatility and the pro-cyclical presentation within the balance sheet. Gertrude Tumpel-Gugerell recently states at a colloquium in April 2010 that in line with European Central Bank's viewpoint, fair value accounting does not provide useful information to decision makers and investors. Potential interim changes in fair value merely enlarges the volatility of the financial accounts without providing actual ''information content'' [11] .

Critics of fair value contend that although fair values might be valued relevant during times of relative market stability, they are deficient in relevance and reliability during times of relative instability (Barth, Landsman, 2010). Mentioned that MTM regime is based on market prices, apparently during good times when market is active (liquid), it produces more positive results thereby

products value could be overestimated or distorted by market inefficiencies, investor irrationality or liquidity (Laux, Leuz, 2009). Also, it might be misleading to assets held for long period and particularly to maturity. If market declines, underestimate the values and when market is not active (illiquid) the value of assets or liabilities is evaluated by using valuation models. After all, the reasonable estimate of the price that took place in a transaction between two parties is difficult to be found. Such models often require considerable judgment and estimation (PWC, 2009), which may make them subjective and unreliable.

Under MTM accounting, the value of an asset relies on the prices at which others have managed to sell their assets. When others sell, observed transaction prices are depressed more than is justified by the fundamentals and exercises negative effect on all others but especially on those who have chosen to hold on an asset (Plantin et al, 2008). The above reasons fuel the flame of fair values in the recent years maximising so the volatility of the financial accounts.

To conclude, the longer the duration of an asset, the more vulnerable the asset is to volatile. When the market is illiquid more vulnerable the asset is. At this point the fair value regime comes because the major proportion of banks balance sheets consist of items that are long duration and illiquid.

Empirical evidence is generally consistent with the view that the procyclicality of the financial system can be at the root of the recent troubles (Borio, Furfine and Lowe, http://www.bis.org/publ/bppdf/bispap01a.pdf). Fair value overstates values and profits (leading to stronger balance sheets) when markets are rising but similarly, has a tendency to overstate the declines in value (so weaker balance sheets) on the way down. This has led to criticism that fair value adds to so-called 'procyclicality' by magnifying the effects of the business cycle (FSF, 2009). During an economic bloom or differently a cyclical upswing, financial institutions have the tendency to be extremely optimistic about the economy and so their customers' position. Banks promote loans against poorer collateral financial instruments (Gonzales, 2009) and hence they reduce the risk. Simultaneously, banks' profitability is in upsurge and procyclicality contributes to credit growth. In contrast, when the economy goes down, business cycle trends downwards. The risks rise and banks behave in a way not lending either within them or to the public by imposing loan restrictions and their capital condition worsen which may lead to a credit crunch and so on so forth. As financial institutions record some of their instruments at fair value and take write-downs when prices fall, they are obliged to sell off assets maintaining compliance with regulatory capital requirements. Some observers believe in that fair value accounting has effectively been driving business behaviour rather than reflecting it - by encouraging banks to over-lend in good times while exaggerating their financial problems when the business cycle turns down. The result is systematic downward pressure on pricing. Fair value usage clearly reflects these changes on financial statements (PWC, 2008). Ultimately, even though market value reflects the real economy and has the advantage of transparency to investors, it may not produce the financial information most suitable for prudential supervision purposes.

At the end it has significant value to see the survey by Valuation Research Corporation in 2009 about FVA. Although a little confidence is demonstrated in that model, professional bodies still prefer it.

To the question whether FVA is beneficial:

FVA has caused more problems than benefits 47.5%

FVA has merit and is about right 52.4%

On the question if the collapse of assets active markets has caused FVA to be unsupportable:

Yes, market turmoil negates FVA validity 58%

No, market turmoil does not negate FVA validity 42%

It is worth to be said at this point that some of those of 58% would still prefer fair value (author's opinion even though the corporation says they would prefer a return to historical cost accounting).

Revert to Historical Cost Accounting 33.8%

No Reversion 37.9%

No Response  28.2%

2.1 Empirical Review

Banks in Greece follow a mixture of the French-German accounting system with a very small capital market (Anagnostopoulos, Buckland, 2007). They operate into a system that is strongly credit-based, with banks being the principal financier of the country's economy. As such, the requirement for public disclosure is much more limited when compared to strong market-based systems, such as UK and Germany where prices are strongly established, competitive markets and thus the pressure for systematised, timely information is vital. Further, it should be added that government intervention co-exists with the Bank of Greece consulting with the government for fiscal and monetary policy issues. The international standards took effect in Greece like in Europe generally after 1.1.2005 and the first companies which applied them are the quoted ones. For the purposes of this paper four Greek banks have been chosen in order to be analysed the case of fair value in the Greek banking sector, National Bank of Greece, Alpha Bank, EFG Eurobank (Ergasias) and Piraeus Bank. Those four banking institutions balance their financial statements according to IAS and IFRS, representing the harmonization pursuance by the European Union. All those aspects contribute to a successful analysis. The institutions have been chosen as the four largest according to Deloitte Greek banking sector highlights (p.23, 2010) regarding the assets held.

Presentation of the four largest banking institutions in Greece

National Bank of Greece: NBG is the main member of the homonymous Group and provides a wide range of products and services both to corporate customers and private individuals. Also, its services include investment banking, brokerage, insurance, asset management, leasing and factoring. As the largest bank in Greece (576 domestic banking units and 1500 ATMs) effectively covers the whole country as well as 1.181 branches overseas give value to its position overseas so it is thought a leading player in the domestic markets. The Group possesses by far the largest network for the distribution of financial products and services in Greece [12] and the first Greek bank in New York stock exchange market. In the fiscal year 2009 the Group realised a profit of 225 millions approximately and for total assets 112.241 millions of Euros (National bank of Greece, p. 21-22, 2010).

Eurobank EFG Group: Eurobank or known to Greeks as Ergasia Bank has a presence in 10 countries as member of International EFG banking group. It mainly offers investment, private and retail banking service and though a network and though a network of more than 1600 branches, business centres and points of sale give a distinct image. The last distinction is the best developed Market Bank in Greece in 2010 according to Global Finance Magazine [13] . In 2009 the total assets and profit recorded 316 and 84,269 million respectively (EFG Eurobank Ergasias S.A, 2010).

Alpha Bank Group: Located in Greece and includes companies in Cyprus, Balkans, Ukraine and U.K. It offers services such as retail and corporate banking, investment banking, financial brokerage and insurance services, real estate management, hotel activities. The first name was Pisteos Bank, in 2000 it merged another bank and renamed to Alpha Bank.

The parent company of the Group is ALPHA BANK A.E. (S.A) which operates under the brand name of ALPHA BANK. Profit generated in the year ended 2009 was 349,077 and total assets ~69,596 million E (Alpha bank, 2010).

Piraeus Bank: Was initially public before was privatised in 1991. The institution leads a group of companies covering financial and banking activities in the Greek market. It possesses know-how in the areas of retail banking SME's (small and medium enterprises) capital and investment market. It focuses and promotes environmentally friendly investments with strong presence in the field of ''green'' banking and relevant services in saving energy, waste management, ''green'' transportation, green chemical products organic farming [14] with total assets 54,279m and profit 205,629m (Piraeus Bank, 2010).

Measurement of fair value

I stopped at this point because of not knowing if it is better to write about the group (consolidated accounts) or for the domestic banks individually.