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%0Greek Bank Plan Unlikely to Trigger CDS
%0
LONDON (Reuters)-Politicians and bankers are confident
that a French proposal for a Greek bailout can be adopted
without triggering a pay-out in credit insurance, lifting a
key hurdle to a rollover of %0Greek debt, sources told Reuters.
The French plan, discussed at a high-level meeting in Rome
this week, has resulted in "confidence" that Credit Default
Swap markets would give it their thumbs-up, a derivatives
expert with %0 knowledge of the talks said.
"It is not rocket science for a lawyer to figure out that a
debt exchange won't trigger a credit event," the source told
Reuters.
Politicians are adamant a Greek bailout can only work if %0 it
avoids a so-called credit event that would trigger a pay-out
of CDS, derivatives designed to hedge against a sovereign
default.
"(The plan) will be seen to comfortably not trigger the CDS
... the issues with the %0rating agencies and accounting are
far bigger," the person said.
Banks have also received positive signals from ratings
agencies that they will not call the French plan a default,
clearing a second important hurdle that %0could have scuppered
the debt renewal plan.
French banks, which have some of the largest holdings of
Greek sovereign debt, have proposed voluntarily renewing part
of the bonds when they fall due, but on different terms. %0That
proposal is now being discussed in Germany too.
Brussels is insisting that banks and insurers take part in
the planned second bailout package for Greece, facing rising
pressure in countries including Germany, Finland %0and the
Netherlands to share the burden with taxpayers.
Reassurances from market players that a debt roll-over will
not trigger the CDS is a crucial step and would send a strong
signal that banks are taking part without %0coercion. This is
seen as essential to avoiding a knock-on impact on other
markets.
The International Swaps and Derivatives Association is the
independent market organization that decides on what
constitutes a credit %0 event, through a committee made up of 10
sell- and buy-side market participants.
Despite the optimism in Rome, ISDA's make-up means the
outcome of its decisions are always subject to uncertainty,
the source said. ISDA was %0 present as an unofficial observer
at the meeting, but the rating agencies did not attend.
By Douwe
Miedema
For more hedge fund industry news, visit Hedge Funds | HedgeWorld | The Definitive Hedge Fund Community
19:24-29/06
%0
LONDON (Reuters)-Politicians and bankers are confident
that a French proposal for a Greek bailout can be adopted
without triggering a pay-out in credit insurance, lifting a
key hurdle to a rollover of %0Greek debt, sources told Reuters.
The French plan, discussed at a high-level meeting in Rome
this week, has resulted in "confidence" that Credit Default
Swap markets would give it their thumbs-up, a derivatives
expert with %0 knowledge of the talks said.
"It is not rocket science for a lawyer to figure out that a
debt exchange won't trigger a credit event," the source told
Reuters.
Politicians are adamant a Greek bailout can only work if %0 it
avoids a so-called credit event that would trigger a pay-out
of CDS, derivatives designed to hedge against a sovereign
default.
"(The plan) will be seen to comfortably not trigger the CDS
... the issues with the %0rating agencies and accounting are
far bigger," the person said.
Banks have also received positive signals from ratings
agencies that they will not call the French plan a default,
clearing a second important hurdle that %0could have scuppered
the debt renewal plan.
French banks, which have some of the largest holdings of
Greek sovereign debt, have proposed voluntarily renewing part
of the bonds when they fall due, but on different terms. %0That
proposal is now being discussed in Germany too.
Brussels is insisting that banks and insurers take part in
the planned second bailout package for Greece, facing rising
pressure in countries including Germany, Finland %0and the
Netherlands to share the burden with taxpayers.
Reassurances from market players that a debt roll-over will
not trigger the CDS is a crucial step and would send a strong
signal that banks are taking part without %0coercion. This is
seen as essential to avoiding a knock-on impact on other
markets.
The International Swaps and Derivatives Association is the
independent market organization that decides on what
constitutes a credit %0 event, through a committee made up of 10
sell- and buy-side market participants.
Despite the optimism in Rome, ISDA's make-up means the
outcome of its decisions are always subject to uncertainty,
the source said. ISDA was %0 present as an unofficial observer
at the meeting, but the rating agencies did not attend.
By Douwe
Miedema
For more hedge fund industry news, visit Hedge Funds | HedgeWorld | The Definitive Hedge Fund Community
19:24-29/06
).
