Aussie bank blames accounting standards for loss

Australia’s third biggest bank, Melbourne-based
Australia & New Zealand
Banking Group Ltd
(ANZ) reported today a $US200m one-off loss provision
relating to its exposure to US debt insurer ACA Capital Holdings.

Michael Smith, ANZ chief executive, said the bank’s exposure to the US
monoline bond insurer might be recovered over time but uncertainty about its
ability to meet its obligations had forced the bank to make a provision to cover
any potential loss.

‘Today though, the bottom line is the derivative accounting standards mean we
will take a provision on this exposure of approximately $US200m (?102m) – this
is driven by the accounting standards,’ Smith told an investors’ briefing,
according to Interactive Investor.
reports ANZ had bought default protection on a portfolio of investment grade
companies from ACA using a credit-default swap, a derivative used to speculate
on corporate credit quality. After ACA was cut to non-investment grade, the bank
was required to raise an ‘individual provision’ of $200 million.

the story in the Interactive Investor

Related reading