Greek debt crisis stirs bank fears

Financial Times
June 12, 2011

Concern is growing among regulators that efforts to minimise the knock-on effects of a Greek government default would undercut the global drive to make banks safer by forcing them to hold more capital.

The German government and the European Central Bank are at loggerheads over how to involve private-sector holders of Greek bonds in a second bail-out of Greece.

Berlin wants a “soft restructuring” or extension of bond maturities, which ratings agencies and investors regard as a default. Some banking regulators suspect the German government is pushing for a form of technical Greek default but wants to shield its own banks – and those in the rest of the eurozone – from a big part of the impact by exploiting loopholes in banking regulation.

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