Stournaras pours cold water on bond swap plan

By Yiannis Papadoyiannis

The Finance Ministry is ditching banks? plan for a bond swap that would have eased their recapitalization requirements.

According to sources, Minister Yannis Stournaras has rejected the proposal that local banks presented to him, suggesting that this would be a move that would benefit bank shareholders disproportionately. Ministry sources added that such a move would generate accusations about favorable treatment of banks in comparison with other holders of Greek bonds.

That is also the view by the troika ? i.e. the representatives of Greece?s creditors ? who had earlier rejected a similar plan.

Nowadays domestic lenders have in their portfolios bonds issued after the March 2012 bond exchange, known through the acronym PSI (Private Sector Involvement), which have a nominal value of 14 billion euros but are traded at 35 basis points, which means their current value stands at 4.5 billion euros. Due to this difference, banks are burdened by accounting losses of 9 billion euros, which a bond swap would practically erase as the new bonds would have been closer to the nominal value of the existing ones.