Are Banks Soluble in Financial Markets? A Note on Accounting for Distressed Greek Sovereign Debt at Fair Value

Different approaches to accounting involve different, often implicit, assumptions as to the functioning of the monetary and financial system. In particular, fair value accounting, unlike historical cost accounting, relies on the assumption of asset (and liability) market liquidity, and may require decisive intervention of monetary authorities in an effort to preserve that liquidity. This paper intends to start discussing the mutual implications between money and accounting, with a view to enhance the overall stability of the financial system. The recent debate concerning accounting for distressed governmental securities will be taken as case of reference