Greek precedent exposes banks, says Ackermann

Financial Times
November 8, 2011

The precedent set by the restructuring of Greek sovereign debt risks leaving banks more exposed to future financial crises of other countries, according to the man who helped to orchestrate the so-called “private sector involvement” in the rescue plan for Athens.

Banks and other bondholders that volunteer for a 50 per cent cut in the value of Greek sovereign debt could set a precedent for other sovereign haircuts, according to Josef Ackermann, chief executive of Deutsche Bank and the eurozone’s most prominent banking head.

He insisted the Greek PSI deal should be an “exception”, echoing the language of other bankers and politicians.

“If you open up the Pandora’s box, then who is willing to invest in sovereign risk?” he told the Financial Times.

“The violation of a risk-free asset class will have long-term consequences.”

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