Here, in no particular order, are some things that piss off European financial regulators:
- Independent non-government entities with semi-official standing tasked with helping investors assess the balance sheets of companies;
- Talking shit about European banks;
- Financial markets, as a tool of price discovery;
- Financial markets, all kinds.

If only someone could somehow combine all those things to really steam European politicians. Like, maybe the International Accounting Standards Board - a private organization that sets the IFRS accounting standards followed in Europe and much of the rest of the world - could send a letter to European regulators suggesting that their banks are wildly undercapitalized because they are not appropriately reflecting market prices on their balance sheets?

Well that happened:

The letter did not single out particular countries or banks. But according to one person familiar with the correspondence, it reflected concern at the approach taken by BNP Paribas and CNP Assurances.

The French bank and insurer both announced 21 per cent writedowns, as envisaged by last month’s Greek bail-out. They argued there were no reliable market prices to guide a “fair value” for Greek government debt because of their illiquidity and instead used a “mark to model” valuation. Banks and insurers that used market prices suffered a bigger hit. Royal Bank of Scotland wiped £733m from the value of a £1.45bn Greek government bond portfolio – a 51 per cent cut.

Mr Hoogervorst challenged the justification for a “mark to model” approach and also the valuations these produced. “Although the level of trading activity in Greek government bonds has decreased, transactions are still taking place,” he said. “It is hard to imagine that there are buyers willing to buy those bonds at the prices indicated ... it is therefore difficult to justify that those models would meet the objective of a fair-value measurement.”

As FT Alphaville has pointed out in the past, "mark to model" is to say the least a pretty unusual way to value government bonds, even ones that trade pretty thinly. Still it seems unlikely that European regulators will get too worked up about this, as questioning these valuations would both fly in the face of assurances that nothing is fucked at the banks - and suggest that market prices, even when they go down, might be telling us something.

IASB criticises Greek debt writedowns [FT]