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Euro Central Banks Said to Swap Greek Investment Bonds
A Euro sign sculpture stands in front of the European Central Bank's headquarters in Frankfurt. Photographer: Simon Dawson/Bloomberg

Euro-area central banks will swap the Greek bonds in their investment portfolios for similar securities to avoid enforced losses during a debt restructuring, a euro-area official said.

The swap will happen today and is identical to one the European Central Bank carried out last week with the Greek bonds acquired in its asset-purchase program, the official said. The new Greek bonds will be immune to collective action clauses, or CACs, ensuring central banks don’t incur any losses when a private-sector debt write-down takes place, the official said on condition of anonymity. A spokesman for the Frankfurt-based ECB declined to comment.

Announcing a second bailout for Greece earlier today, euro-area finance ministers said part of the deal is for governments to contribute the equivalent of the profits their national central banks make on Greek bonds in investment portfolios. That will reduce Greece’s debt ratio by 1.8 percentage points by 2020 and lower its financing needs by about 1.8 billion euros ($2.4 billion), they said. Ministers didn’t say whether the bonds would be swapped for equivalent assets that are exempt from CACs.

The ECB will also distribute the profits derived from its purchases of Greek bonds to national central banks, who will give the money to their governments to bolster Greece’s aid package, finance ministers said in a statement.

Draghi’s Silence

ECB President Mario Draghi has yet to comment publicly on the ECB’s involvement in the wrangling over Greece. The bailout package agreed today aims to reduce the nation’s debt to 120.5 percent of gross domestic product by 2020 from more than 160 percent last year.

Greece wanted the bonds in the national central banks’ portfolios to be included in a private-sector deal aimed at slicing about 100 billion euros off its debt, officials said last week. The central banks argued they would have dumped the bonds if they were normal investors and that they shouldn’t be forced to take losses on them.

CACs typically make all bondholders subject to losing part of their capital in a retrospective action that does not require the assent of all lenders.

The next step will be to prepare legislation that ensures the ECB can continue lending to banks using Greek collateral should rating companies deem the country to be in default while the private-sector swap is taking place. Europe’s rescue fund may provide 35 billion euros to help Greece buy back those bonds, according to a draft law published by Greece on Feb. 12.


Euro-area governments last July agreed on a guarantee for the ECB, which cannot accept bonds with a default rating. The Greek finance ministry said today that the swap will be offered to investors this week. It may take around two weeks to complete.

The value of Greek bonds held by euro-area central banks other than Greece in their investment portfolios is less than 10 billion euros, another euro-area official has said. Not all 17 national central banks in the euro area have Greek bonds in their portfolios. Germany’s Bundesbank doesn’t, another official said last week.

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