A credit rating downgrade to Portugal [by Moody’s Investors Services] added to fears Europe’s banks face heavy euro zone losses if a private sector plan to help Greece comes unstuck, piling pressure on creditors meeting on Wednesday.
The Institute of International Finance (IIF) lobby group chaired the meeting of banks and other private-sector creditors in Paris, held at the headquarters of BNP Paribas, France’s biggest bank and one of the biggest holders of Greek debt.
BNP’s chairman said the banks needed to find a solution to the Greek debt crisis that would not cause ratings agencies to declare a default.
An IIF spokesman said just before 1200 GMT that the meeting had ended, but no details of the outcome have yet been released.
“We need to find a solution that avoids a default since that’s the decision of the authorities,” Michel Pébéreau told BFM Radio in an interview.
He said it was important to distinguish between the Greek debt issue and similar crises that are roiling Portugal as well as Ireland.
Banks in France, Spain and Germany are the biggest holders of Portuguese government bonds, with lenders in each country holding about $8 billion of bonds at the end of last year.
That became a bigger concern after ratings agency Moody’s late on Tuesday cut Portugal’s credit rating to junk and warned the country might need a second round of rescue funds before it could return to capital markets.
Europe’s bank sector share index was down 1.9 percent by 1110 GMT, with banks in peripheral euro zone countries performing worst.
Portugal’s Millennium bcp shed 5.8 percent, and Banco BPI dropped 4.5 percent.
Italy’s UniCredit and Intesa Sanpaolo and France’s Credit Agricole each fell over 4 percent, and Spain’s Santander and BBVA , France’s Société Générale and BNP, and Britain’s Barclays all lost over 2 percent.
Banks are attempting to fine-tune a private sector deal for Greece that can get past credit rating agencies without it being termed a default.
A lot of work remains to be done, and Wednesday’s meeting will not be decisive, several sources have said.
French banks have proposed voluntarily renewing Greek bonds when they fall due. Bondholders would reinvest at least 70 percent of the proceeds from bonds maturing between now and the end of 2014 in new 30-year Greek debt.
The Financial Times said a new proposal, sweetened to be more attractive to Greece, would be presented and offer to lower the interest rate and raise the proportion of debt targeted for rollover in the French plan.
The IIF, which represents over 400 financial firms, last week said it supported proposals to aid Greece, and member firms were considering a small number of options.
Overseas banks have just over $200 billion of exposure to Portugal, including $34.6 billion of government debt, according to the Bank for International Settlements, which provides the only cross-border bank lending data.
Spanish banks held $8.5 billion of Portuguese sovereign bonds at the end of December, French banks had $8.2 billion and German banks had $7.8 billion, the data showed.
(Reporting by Christian Plumb in Paris, Steve Slater in London, Sonya Dowsett and Jesus Aguado in Madrid; Editing by Will Waterman)
Topics Europe
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