ECB split on how to handle any Greek bond losses

Reuters
January 25, 2012

The European Central Bank has ruled out taking voluntary losses on its Greek bond holdings but is now debating how it would handle any forced losses and whether to explore legal options to avoid such a hit, central bank sources told Reuters on Wednesday.

Earlier this month, speculation that the bank was considering taking losses on its Greek bonds as part of broader moves to stabilize Athens' finances grew after ECB President Mario Draghi repeatedly dodged questions on the issue.

One source close to talks among ECB policymakers said that while France, Italy and the ECB board in Frankfurt were against accepting losses, some national central banks, which have expressed reservations over the bond purchases from the start, now accepted that losses may be unavoidable.

"The ECB will not take losses on its Greek bond holdings voluntarily ... but there is a fierce debate within the ECB on how to handle forced losses," the source said.

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