Deutsche Bank CEO Josef Ackermann is playing a key role in negotiations on reducing ~50% haircut investors might have to take on Greek debt holdings, according to several sources who spoke to the German publication BILD.Word is that Ackermann, as Chairman of the International Banking Federation, is taking a central role in fighting against the proposed ~50% write-downs that owners of Greek debt might be forced to take if Eurozone leaders take Greece through a strategic, orderly default that does not trigger a credit event.
This is a critical development in the ongoing battle between owners of Greek debt, like banks, and owners of Greek CDS, private investors like hedge fund managers.
The feeling is that if CDS owners would be “punished” by not being paid out on their CDS, then so should investors on Greek debt, like Deutsche Bank (Deutsche Bank’s estimated total Sovereign exposure to Greece, as estimated by the EBA bank stress tests in July, is around 3,622 million euros (PDF). A more recent, but unsourced and anonymous, estimate we’ve gotten says that DB has $1,522 million in sovereign bonds and public sector lendings exposure, which might account for YTD asset sales).
However there’s a big caveat.
MSNBC provides some background:
Many banks are believed to have too little capital in reserve to covers those losses, prompting calls by regulators to force bankers to raise more capital. Without stronger capital cushions to withstand Greek debt losses, European governments fear they’ll have to step in to clean up the financial mess.
In fact, Ackermann in September warned that many banks would not survive having to revalue their Greek debt holdings at market value.
As October 23rd approaches, word that Ackermann is playing a key role in the negotiations might help explain why Deutsche Bank is taking a bigger hit today than other Euro banks.
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