Lenders wary of bond swap
Greek banks stand to miss out on future earnings of 1.2 billion euros if a plan to replace European Financial Stability Facility (EFSF) bonds with other fixed-rate securities – one of the measures under examination for the easing of the Greek national debt – is implemented.
The plan concerns bonds with a face value of more than 30 billion euros that are in banks’ portfolios and were given to them in the context of the various recapitalizations.
The European Stability Mechanism (ESM) is considering swapping these bonds with other fixed-rate securities as a shortterm means of lightening the Greek debt, but this has met with the opposition of Greek banks’ managements, who feel that, again, an easy political solution is to be forced at the expense of the credit system.
The EFSF bonds add up to 32 billion euros based on original prices and the European Central Bank has repeatedly prevented banks from valuing them at current prices, which would present earnings for them. When they are allowed to value them at current prices, the banks will gradually reap profits of 1.2 billion euros. Bank officials say that this would be a significant source of revenues during a very difficult period, just as lenders have to tackle the mountain of nonperforming loans totaling 100 billion euros.