Societe Generale SA, France’s second-largest bank, will have no costs related to Greek credit-default swaps after the biggest sovereign restructuring in history, Chief Executive Officer Frederic Oudea said.
“For Societe Generale it will be zero cost,” Oudea said today at a press conference in Paris. Societe Generale has “no net exposure” on Greek credit-default swaps, he said.
Private investors, including Societe Generale, BNP Paribas SA and Germany’s Deutsche Bank AG, last week forgave more than 100 billion euros ($131 billion) of debt, paving the way for a second bailout for Greece from euro-area authorities and the Washington-based International Monetary Fund.
Greece’s use of collective action clauses requiring investors to take losses under a debt restructuring triggers payouts on about $3 billion of default insurance, the International Swaps & Derivatives Association said March 9. A total 4,323 CDS contracts may be settled after ISDA’s determinations committee ruled the use of collective action clauses is a credit event, the industry group said.
“European banks’ net positions are contained,” said Oudea, who is also the head of the French Banking Federation. “CDSs, according to all circulating figures, do not represent a significant issue for any bank nor for the financial system.”
Greece, ending nine months of negotiations with private bondholders and public authorities on a debt restructuring, reached its target for participation in the debt swap after using the collective action clauses to get the holdouts to join, with investors holding 95.7 percent of the bonds taking part.
CDSs pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower not respect its debt agreements.
Societe Generale, which also operates an Athens-based branch network, had 1.06 billion euros of Greek sovereign bonds as of Dec. 31.