Greek bonds

Ralph Atkins

Greece’s debt rescheduling has already bitten for some eurozone banks.

The ECB last week demanded €17bn in “margin calls” — the largest amount ever — from banks tapping it for liquidity.

The ECB gave no details but the surge followed its decision to suspend the eligibility of Greek bonds as collateral for the central bank’s loans. Read more

Ralph Atkins

The deal is all but done but we still have no formal announcement that the ECB has exchanged its Greek bonds for new bonds that will be exempt from legal steps by Athens to force losses, as reported already.

The hold-up is, perhaps, over the issue of what to do about those Greek bonds held by eurozone national central banks in investment portfolios but not acquired under the ECB’s bond buying programme launched by Jean-Claude Trichet, then president, in May 2010. We don’t have any figures on how big these holdings are, or where exactly they are — although the biggest are thought to be held by the central banks of France, Cyprus and, of course, Greece. The Bundesbank has none. Read more

Claire Jones

To the chagrin of those at the Eurotower, the IMF is urging the ECB to take a hit on its €40bn in Greek government debt.

The ECB is worried hugely about the principle of it taking a loss, or foregoing profits. But there is also the threat to its own finances: the ECB, like many a central bank, does not have much in the way of a capital buffer.

How would the ECB’s finances look in the event of a Greek default? Well this article, published back in May by the FT’s Frankfurt bureau chief Ralph Atkins, goes some way to answering this question. 

 Read more

Ralph Atkins

As Greece’s largest bond holder, with a portfolio worth perhaps €40bn, the European Central Bank is watching closely the tense and protracted negotiations over losses private investors would accept voluntarily as part of a second refinancing deal for the country. Mario Draghi, ECB president, will discuss progress when eurozone finance ministers gather tonight (Monday) in Brussels.

The ECB has two objectives: first, to secure a deal that has a reasonable chance of working and, second, to avoid bearing any burden itself. Neither will be easy. Read more