Banks signal Greek debt writedowns

Financial Times
July 1, 2011

The world’s largest banks signalled that they were willing to take writedowns on their stocks of Greek debt to help foster a wider solution to the eurozone sovereign debt crisis.

In a statement, the board of the Institute of International Finance, representing more than 400 of the world’s largest banks, announced its intention to consider buy-backs of Greek government bonds “to lay the basis for a more sustainable debt position”.

Since market prices of Greek debt are far below their original sale prices, any buy-backs by the Greek authorities, European governments or other official purchasers that were at prices close to current market prices could provide significant debt relief to Greece.

The consequence would be for banks and insurance companies to take losses on the debt sold to new official creditors, reducing the total stock of debt owed by Greece and enhancing the sustainability of the country’s public finances.

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