German banks top French peers on $23-bn Greek debt

German lenders were the biggest foreign owners of Greek government bonds, with $22.7 billion in holdings last year, making them a likely negotiation partner in burden-sharing deals for the country, data from the Bank for International Settlements (BIS) showed.

French banks, which led the group of Greek creditors with overall claims of $56.7 billion, trailed their German peers on sovereign debt with $15 billion, according to the June report from the Basel-based BIS. The overall figure for French banks was inflated by $39.6 billion in lending to companies and households, mainly because of Credit Agricole SA’s Greek unit, Emporiki Bank SA. German lenders have no major units in the country.

 

At the end of 2010, Greek government bonds held by banks in countries reporting to the BIS totalled $54.2 billion, of which 96 per cent was owned by European lenders. Germany and France, which accounted for 69 per cent, may be asked to weigh in when the European Union goes ahead with plans to win Greece creditors to roll over their debt in a ‘Vienna-style’ programme.

“Implementing an approach similar to the Vienna Initiative would demonstrate private sector involvement has been explored,” Justin Knight, a European rates strategist at UBS AG in London, wrote in a note last week. This may make voters “more amenable to the idea that public sector funds need to be deployed going forward,” he said.

European officials are preparing a new aid package for Greece that includes a ‘voluntary’ role for investors after the EU and the International Monetary Fund approved the fifth installment of Greece’s euro 110-billion ($161 billion) bailout last week.

Among the largest disclosed holdings of Greek government bonds by non-Greek European banks are BNP Paribas SA’s euro 5 billion, Dexia SA’s euro 3.5 billion, Commerzbank AG’s euro 3 billion, Societe Generale SA’s euro 2.7 billion, ING Groep NV’s euro 2.4 billion and Deutsche Bank AG’s euro 1.6 billion, Goldman Sachs Group Inc said in a research note published last month.

“We have long argued the holdings of Greek government debt are fairly concentrated,” Barclays Capital analysts, led by Sherif Hamid, wrote in a note June 3. “The top 30 holders likely account for roughly two-thirds of the debt, and this should make it easier to negotiate and achieve a decent success rate on any restructuring.”

Greece’s total debt is euro 340 billion, according to data compiled by Bloomberg. The euro 7.4 billion in Greek government bonds held by FMS Wertmanagement GmbH, which is winding down assets of Germany’s Hypo Real Estate Holdings AG, weren’t included in the BIS figures because FMS isn’t a bank. Neither were the European Central Bank’s holdings, estimated at euro 50 billion by Citigroup Inc. Greek banks own about euro 60 billion of the country’s debt, according to Goldman Sachs.