French banks urged to raise Greek debt haircut

Financial Times
October 21, 2011

The French stock market regulator has advised French banks to take bigger losses on their holdings of Greek government bonds, arguing that the relatively small writedowns announced in recent months were now seen as insufficient.

The Autorité des Marchés Financiers has written to financial institutions to tell them to reassess their decision to value Greek sovereign debt in line with the terms of the Greek bail-out agreed in July, the Financial Times has learned.

Controversially, the 21 per cent “haircut” envisaged for private sector bondholders as part of the rescue package had been used as a benchmark for losses by various French banks and some insurers when they reported their results for the first half of 2011.

In sharp contrast, some rivals in other countries – such as the UK and Germany – had recognised much heavier losses of about 50 per cent on their “available for sale” Greek government bonds, in line with distressed market prices.

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