Major banks hesitate to commit to Greek package

Financial Times
July 24, 2011

Several European banks with large exposures to Greek sovereign debt have yet to sign up to a plan for private-sector bondholders to contribute €37bn to a second Greek rescue package, the Financial Times has learned.

The UK’s Royal Bank of Scotland, Germany’s DZ Bank and LBBW and Austria’s Erste Bank, which between them hold about €3bn of Greek sovereign debt, are among the lenders that have not yet committed to take part in a programme that will see participants swap or roll over their Greek debt for bonds that mature in 30 years.

Senior bankers said considerable uncertainty remained about the details of the Greek bail-out plan and its likely application. Even the level of projected participation of private-sector bondholders – which the European Union said would be €37bn over the next three years, and the Institute of International Finance, which has co-ordinated bondholders, said would be €54bn – has caused widespread confusion.

In fact, the discrepancy is straightforward – the €54bn is indeed the amount that the banks expect to commit to Greece, assuming that there is 90 per cent take-up of the rollover or exchange plan, but the €37bn is what Greece would actually receive, net of €16.8bn of the “credit enhancement” programme.

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