AFM sees enhanced transparency of sovereign debts in Dutch financial reporting

In their financial reporting 2011, listed financial institutions increased transparency of their exposure to risks arising from sovereign and non-sovereign debts compared to 2010. That is the main finding from this thematic review of the AFM. Dutch listed financial institutions have been more transparent than their European peers. This is based on a review that was conducted by the European Securities and Markets Authority (ESMA) at the same time.

Sovereign debt crisis

In the past year, the AFM conducted a review related to sovereign and non-sovereign debts. Awareness of the nature and extent of these exposures is important for investors at the background of the sovereign debt crisis; transparency may help the financial sector to regain trust. The review included ten Dutch listed financial institutions. In particular, the review related to risks arising from exposures of these financial institutions to Greece, Italy, Ireland, Portugal and Spain. The AFM found that measurement and recognition of losses related to Greek sovereign debt was in accordance with the financial reporting requirements.


The AFM sees room for improvement in a number of areas. This includes disclosure of the gross exposures, the nominal amount, a maturity analysis and reconciliation, by country, of the sovereign debt exposures at the beginning and end of the financial reporting period. Although transparency related to sovereign debts increased, the AFM found that only a minority of the financial institutions provided information on non-sovereign debts, such as corporate bonds and loans. According to the AFM, transparency must also be enhanced in this respect.

Six out of seven financial institutions exposed to Greek sovereign debt recognised impairment losses. One financial institution did not impair Greek sovereign debt; the exposure was minimal. Two financial institutions used estimates to measure Greek sovereign debt. Unfortunately, however, the valuation method was not adequately disclosed. Consequently, the reasonableness and reliability of the estimates used could not be properly assessed.

Finally, the AFM calls for enhanced transparency related to the use of credit default swaps by country. Also, the AFM found that certain information about risks related to sovereign debts and provided to investors during presentations in relation to the publication of their annual results, was not included in the financial reporting.


Today, ESMA has published a report, which sets out the results of a European review on accounting practices and disclosures regarding exposure to Greek sovereign debt. This reveals that in other European countries disclosures regarding these kind of investments fell more short of meeting requirements. ESMA calls national and international supervisors to supervise quality of financial reporting, in particular regarding measurement and disclosures related to sovereign and non-sovereign debts.

The AFM is committed to promoting fair and transparent financial markets.

As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.

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