FRANKFURT—Some European governments have initiated informal talks with their top banks on whether creditors would volunteer to extend the maturities of their Greek debt holdings, seen as a key component in a new bailout package for Athens.
Several German banking sources said that the German government has begun discussions with leading German banks. A senior French government official confirmed that similar conversations are taking place with French banks.
Government officials in Germany, France and other euro-zone countries face pressure to hammer out the basic details for private-sector participation ahead of a July 3 Eurogroup meeting, following an agreement struck last week between France and Germany to involve private-sector creditors in a voluntary debt rollover. The question has been how this would work.
Associated Press
Key considerations for financial institutions mulling a voluntary rollover include possible incentives on the terms of the new bonds and assurances from ratings agencies that such a move won't qualify as a default, observers said.
Greek banks are "waiting for some kind of incentive like a higher coupon and guarantees they will get their money back. The problem is that time is getting very tight for this to be done by the next Eurogroup on July 3," a senior Greek official said Wednesday.
German Economy Minister Philipp Rösler on Wednesday called for incentives to participate in the rollover. "If the participation is supposed to be voluntary, we need mechanisms to bring private creditors on board," Mr. Rösler told German daily Handelsblatt in a preview of an article to be published Thursday.
The German Finance Ministry hosted a meeting with major German banks and insurers such as Deutsche Bank AG, Commerzbank AG and Allianz SE on Wednesday to discuss how a voluntary debt rollover by bondholders could shape up, several German banking sources familiar with the matter said, adding that a plan wouldn't be finalized Wednesday.
A spokesman for the ministry wouldn't comment on the reported meeting, but said the ministry is "trying hard to get into talks with the private sector on a national and international level to see how we can quantify participation," before the July 3 meeting.
In France, a government official familiar with the situation said the government also met with banks Wednesday. "Our position is to say the participation should be as wide as possible to include the whole financial sector that has exposure to Greece," the French official said. "Of course we need an idea of the amount that could be collected by this."
German and French participation is critical for a rollover plan to work, given their political influence in negotiations for Greece and their banks' high exposure to sovereign Greek debt.
Latest figures from the Bank for International Settlements show that France's banking sector has the largest overall exposure to Greece, totaling $56.7 billion, compared with German banks' considerably lower exposure of $33.97 billion. But in terms of sovereign debt exposure, French banks have $14 billion, significantly lower than the $22.65 billion held by German banks.
The Dutch government has started similar discussions with local financial institutions, according to a person familiar with the situation.
Separately, the Institute of International Finance, a lobby representing more than 400 financial institutions around the world, has also entered discussions with the Greek government, other international public authorities and its own membership about Greece's debt problems, but only on an "informal" basis, according to a spokesman.
Handelsblatt reported Tuesday that euro-zone policy makers had asked the IIF to review possibilities for a rollover of Greece's sovereign bonds. The IIF stressed Wednesday that the discussions to date haven't involved a formal, policy-making role for the trade group, although IIF Managing Director Charles Dallara is currently in Greece to assist with the situation.
Roughly half of the IIF's members are based in Europe, including a number of institutions that have significant holdings of Greek government bonds. The IIF is chaired by Deutsche Bank Chief Executive Josef Ackermann. Deutsche Bank, Germany's largest listed lender, had a total net exposure of €1.6 billion ($2.31 billion)at the end of 2010.
Major European banks, insurers and institutional investors are also holding talks with credit ratings agencies, which could still derail the plan if they decide it qualifies as a default scenario.
A "credit event," or default, declared by the ratings agencies would cut Greek banks off from vital ECB funding and spark a local banking crisis with spillover effect for broader financial markets. Fitch Ratings warned again Tuesday that even a voluntary extension on debt maturities could qualify as a default.
But economists and bank analysts believe it is still possible to reach an agreement with the ratings agencies that avoids triggering a default. "We assume that there is some room for maneuver for a compromise," BNP Paribas economists wrote Wednesday in a research report.
—(Costas Paris in Athens, Paul Hannon in London, Eyk Henning and Joern Rehren in Frankfurt, William Horobin in Paris, Bernd Radowitz in Berlin and Anna van der Meulen in Amsterdam contributed to this article.)
Several German banking sources said that the German government has begun discussions with leading German banks. A senior French government official confirmed that similar conversations are taking place with French banks.
Government officials in Germany, France and other euro-zone countries face pressure to hammer out the basic details for private-sector participation ahead of a July 3 Eurogroup meeting, following an agreement struck last week between France and Germany to involve private-sector creditors in a voluntary debt rollover. The question has been how this would work.
German Finance Minister Wolfgang Schäuble arrives at the weekly cabinet meeting at the chancellery in Berlin on Wednesday.
The euro zone wants Greece's creditors to make a contribution to a new funding package for the country by using the money they receive from maturing bonds to buy new bonds on roughly the same terms. The European Central Bank has warned that it would oppose the plan unless banks did this purely on a voluntary basis.
Key considerations for financial institutions mulling a voluntary rollover include possible incentives on the terms of the new bonds and assurances from ratings agencies that such a move won't qualify as a default, observers said.
Greek banks are "waiting for some kind of incentive like a higher coupon and guarantees they will get their money back. The problem is that time is getting very tight for this to be done by the next Eurogroup on July 3," a senior Greek official said Wednesday.
German Economy Minister Philipp Rösler on Wednesday called for incentives to participate in the rollover. "If the participation is supposed to be voluntary, we need mechanisms to bring private creditors on board," Mr. Rösler told German daily Handelsblatt in a preview of an article to be published Thursday.
The German Finance Ministry hosted a meeting with major German banks and insurers such as Deutsche Bank AG, Commerzbank AG and Allianz SE on Wednesday to discuss how a voluntary debt rollover by bondholders could shape up, several German banking sources familiar with the matter said, adding that a plan wouldn't be finalized Wednesday.
A spokesman for the ministry wouldn't comment on the reported meeting, but said the ministry is "trying hard to get into talks with the private sector on a national and international level to see how we can quantify participation," before the July 3 meeting.
In France, a government official familiar with the situation said the government also met with banks Wednesday. "Our position is to say the participation should be as wide as possible to include the whole financial sector that has exposure to Greece," the French official said. "Of course we need an idea of the amount that could be collected by this."
German and French participation is critical for a rollover plan to work, given their political influence in negotiations for Greece and their banks' high exposure to sovereign Greek debt.
Latest figures from the Bank for International Settlements show that France's banking sector has the largest overall exposure to Greece, totaling $56.7 billion, compared with German banks' considerably lower exposure of $33.97 billion. But in terms of sovereign debt exposure, French banks have $14 billion, significantly lower than the $22.65 billion held by German banks.
The Dutch government has started similar discussions with local financial institutions, according to a person familiar with the situation.
Separately, the Institute of International Finance, a lobby representing more than 400 financial institutions around the world, has also entered discussions with the Greek government, other international public authorities and its own membership about Greece's debt problems, but only on an "informal" basis, according to a spokesman.
Handelsblatt reported Tuesday that euro-zone policy makers had asked the IIF to review possibilities for a rollover of Greece's sovereign bonds. The IIF stressed Wednesday that the discussions to date haven't involved a formal, policy-making role for the trade group, although IIF Managing Director Charles Dallara is currently in Greece to assist with the situation.
Roughly half of the IIF's members are based in Europe, including a number of institutions that have significant holdings of Greek government bonds. The IIF is chaired by Deutsche Bank Chief Executive Josef Ackermann. Deutsche Bank, Germany's largest listed lender, had a total net exposure of €1.6 billion ($2.31 billion)at the end of 2010.
Major European banks, insurers and institutional investors are also holding talks with credit ratings agencies, which could still derail the plan if they decide it qualifies as a default scenario.
A "credit event," or default, declared by the ratings agencies would cut Greek banks off from vital ECB funding and spark a local banking crisis with spillover effect for broader financial markets. Fitch Ratings warned again Tuesday that even a voluntary extension on debt maturities could qualify as a default.
But economists and bank analysts believe it is still possible to reach an agreement with the ratings agencies that avoids triggering a default. "We assume that there is some room for maneuver for a compromise," BNP Paribas economists wrote Wednesday in a research report.
—(Costas Paris in Athens, Paul Hannon in London, Eyk Henning and Joern Rehren in Frankfurt, William Horobin in Paris, Bernd Radowitz in Berlin and Anna van der Meulen in Amsterdam contributed to this article.)
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