Bank Lobbyists Push European Members to Support Greek Debt Rollover Plan
The Institute of International Finance, which lobbies on behalf of banks, is pressing members that hold Greek government debt to support a rescue package amid concern it may not reach its 90 percent participation target.
European lenders including Deutsche Bank AG (DBK) and BNP Paribas (BNP) SA pledged to back the plan brokered by the Washington-based lobby group. Together, banks that own a total of 61 billion euros ($88 billion) of Greek debt have signed up, according to figures from the European stress tests this month. Banks holding a further 37 billion euros have yet to state their intentions.
“We are contacting institutions to explain the merits of the proposal and the list is growing,” Hung Tran, the IIF’s deputy managing director, said in a telephone interview today. “If several banks don’t sign up, we will cross that bridge when we come to it. Ultimately it is a voluntary process.”
Banks pledged on July 22 to participate in a bond exchange and debt buyback program as European leaders sought to halt the spread of the sovereign debt crisis. The IIF said in a statement it had secured support from 18 European banks for the proposal, by which bondholders will swap holdings for new securities with lower interest rates and longer maturities. The IIF said it wanted owners of 90 percent of Greek debt to back the plan.
‘Some Doubts’
“We have some doubts about the targeted 90 percent participation,” said Kinner Lakhani, bank analyst at Citigroup Inc. in London. “Although the need for collective action has been obvious, there is always the risk of some banks holding out.”
Austria’s Erste Group Bank AG, Cyprus’s Marfin Popular Bank Pcl, Portugal’s Banco Comercial Portugues SA and France’s Groupe BPCE are yet to decide whether to sign up to the project, according to four people with knowledge of the situation who declined to be identified because the talks are private. The four own about 5.7 billion euros of Greek debt, according to the EBA data. Officials at the banks declined to comment.
Agricultural Bank of Greece, the third largest holder of Greek bonds with 7.9 billion euros, is also yet to pledge its support, as is Royal Bank of Scotland Group Plc, which holds 1.2 billion euros. A spokesman for Edinburgh-based RBS declined to comment, while Agricultural Bank of Greece didn’t return calls.
Greece’s financing package will consist of 109 billion euros from the euro region nations and the International Monetary Fund. Financial institutions will contribute 50 billion euros through a series of bond exchanges and buybacks to cut Europe’s biggest-debt load.
Market Return
“Europe knows, the IMF knows, we all know this does not work without continued IMF support,” IIF Managing Director Charles Dallara told reporters in Washington today. He didn’t say what the IMF share of total financing would be.
If all participants in the bailout play their part, “there’s every reason to believe” that Greece could return to capital markets within two years, he said. “That assumes performance.”
After focusing on getting support from European institutions last week, the IIF will now work on getting broader participation, including in the U.S., where the holding of Greek debt is small, he said. He expects the deal to “gain further momentum.”
The timeline for the bond exchange program depends on the Greek government, which is hiring a team to set up the specifics of the exchange, Dallara said. He said he expects the precise terms to be ready “in a matter of weeks.”
To contact the reporters on this story: Liam Vaughan in London at lvaughan6@bloomberg.net
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net
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