Uncertainties about banks’ contribution and exposure to Greek debt

As soon as the 110 billion euros bailout package was approved in Athens, the eurozone urged the banking sector to participate in the collective rescue effort

After the states, will private banks fly to the rescue of Greece? As soon as the 110 billion euros bailout package was approved in Athens on Sunday (May 2nd), eurozone leaders urged the banking sector to participate in the collective rescue effort.

The idea of the governments is less to make it contribute in the form of soft loans to the Greek state – a track however seriously explored in Berlin – than to force it to maintain its level of global financing of the Greek economy.

Clearly, it is a question of not letting go neither the State nor the private sector. Banks are encouraged to keep their Greek sovereign debt securities in their books and, for those doing business in Greece (notably the French banks Crédit Agricole and Societe Generale, among the most active), to continue to grant loans to households and businesses- blog link http://www.fauxleague.com/mortgage-loans-for-people-with-bad-credit-history/ Fauxleague.

In France, during telephone exchanges between the Treasury and banks, Sunday, they committed themselves to play the game, “by maintaining all of their competitions, says one in the entourage of the president of the French Banking Federation (FBF), Baudouin Prot (BNP Paribas): A commitment was made to the public authorities, no other form of participation in the plan was asked of us ” .

A meeting on the same subject is scheduled in Berlin, by Wednesday, May 5th. The challenge, for Germany, is also to give proof of firmness to its banks, to better pass the pill of the Greek plan to a hostile public opinion. The German contribution to the rescue plan will go through the German public bank KfW.

This call not to abandon Greece, while it will face a violent recession, because of the severe austerity plan imposed in exchange for European aid, aims to stop the withdrawal movement, initiated by the banks Foreign.

Since the outbreak of the Greek public finances crisis and the depreciation of Athens’ sovereign debt, major European financial institutions have begun to sell off their stocks of government bonds. At the risk of aggravating the difficulties of Greece.

Three weeks ago, says a financier from London, several British banks have been offered “several hundred million euros of Greek sovereign debt, from a large French bank, determined to get rid of”. Other attempts to sell have been made, but buyers are rare.

“Greece Is On The Red List”

On the private sector side, the tone is the same. Strict instructions have been passed to the teams in Athens, to tighten the credit cracks in the private sector, while inevitably, the defaults will multiply.

“I do not know if the call of solidarity policies towards Greece will change the slogan of the house, but for the moment at home, Greece is on the red list. right to invest a dime! ” indicates a subsidiary manager of a large decentralized bank in France.

In fact, the political directive clashes with the reality principle. On the one hand, the states consider the support of the banks as a normal counterpart to the massive public subsidies granted to the sector during the financial crisis. And this, especially as once again, the Greek rescue plan benefits banks: it removes, at least temporarily, the risk of default on payment of debt, and therefore avoids substantial losses on their bond portfolios.

On the other hand, banks, barely recovered from the subprime debacle, must protect themselves against risks, in particular by avoiding getting bad loans. The new rules of the banking game, in preparation for the Basel Committee, and eagerly awaited by the G20 leaders, are even supposed to reinforce their policy of prudence.

Tied between these conflicting demands, it’s a safe bet that the banks are setting their foot on their commitments in Greece. French banks are, as we know, the most exposed to Greek risk. They are in the line of sight of analysts and stock market investors, who struggle to know where exactly the Greek debt is, and for what amount.

Thus, the exposure of the French banking sector to Greece, all public and private debt combined, reached more than 59 billion euros according to the Bank for International Settlements (BIS) – 53 billion euros at December 31, 2009, according to the Bank of France, including 16 billion public debt, according to other sources extremely reliable.

But to date, only Crédit Agricole has reported a total exposure of … 850 million euros, including its Greek subsidiary Emporiki, while BNP Paribas spoke of a limited exposure. These figures remain incomplete since they are limited to the banks’ own account. Nothing is said about the exposure on behalf of third parties, otherwise on the risks borne by customers (via securities accounts, UCITS, life insurance, etc.).

According to our information, to avoid unpleasant surprises, the French Prudential Supervisory Authority (ACP) and the Autorité des marchés financiers (AMF) have just written to all French banks in order to obtain, in a timely manner, the amount of their exposure to the debts of Greece, Portugal, Spain and Ireland.