SENIOR GLOBAL banking executives will gather in Paris this morning in a fresh attempt to broker a deal on private creditor participation in the next phase of the Greek bailout.
The meeting, in the headquarters of BNP Paribas, comes against the backdrop of an assessment by Standard Poor’s that a French initiative to extend the maturity of some Greek debt by as much as 30 years would result in a debt default. Germany, the Netherlands and Finland are insisting that private investors bear costs in a second international bailout of Greece, but the issues are technically complex and sensitive for banks as they are reluctant to trigger upfront losses on their investments.
German chancellor Angela Merkel said yesterday that euro-zone governments should not give credit-rating agencies the exclusive power to determine creditworthiness. But SP’s intervention is seen as a big setback in diplomatic circles as the French proposal was considered a plausible precedent for other countries to follow.
The Paris meeting will be organised by the Institute of International Finance (IIF), a global banking lobby, and will chaired by its managing director, Charles Dallara.
The institute entered the Greek drama last week when it when co-ordinated a meeting in Rome between bank-sector chiefs and euro-zone officials.
The financiers have been discussing whether to follow the French initiative. At the gathering today, they are likely to seek ways of improving the benefit to Greece while trying to change the parameters of the plan to minimise the risk of default downgrades from rating agencies.
The institute – which draws its directors from Deutsche Bank, Commerzbank, Goldman Sachs, UBS, HSBC and Morgan Stanley – said last week its members were prepared to take writedowns on their holdings of Greek debt to settle the sovereign debt crisis.
Amid signals from euro-zone governments that the second bailout might not be agreed until September, the Paris gathering is considered unlikely to result in an immediate deal.
“This is one of a series of meetings designed to forge a voluntary agreement by private creditors in support of the efforts under way today by the government of Greece,” said a financial industry source.
“The issues on the agenda focus on those highlighted in the IIF’s board statement issued last Friday, which noted consideration of a small number of options, including a rollover or extension of maturities, as well as possible debt buyback proposals.”
Europe has been reluctant to comment on SP’s assessment of the French plan, but Dr Merkel insisted yesterday that the rating agencies should not have the final word.
“As far as the rating agencies are concerned, I think it’s important that we – and by this I mean primarily the troika, the IMF, the European Central Bank and the EU commission – don’t surrender our own ability to judge,” she told reporters in Berlin.
“Therefore I also place my trust above all in the assessments of these three institutions when it comes to certain procedures. Let’s see what happens.”
The Greek central bank said yesterday that the bank deposits of businesses and households fell by €4.9 billion in May to €191.9 billion as a renewed bout of political turmoil took hold. The decline was the biggest since April last year, a month before the country’s first EU-IMF bailout.
