Impact of Greek debt restructuring would now be ‘milder’

THE impact of a Greek debt restructuring on non-Greek European banks would be “milder” now than a year ago thanks to European Central Bank loans, according to Goldman Sachs’ analysts.

A haircut of 20% to 60% on Greek government bonds corresponds to losses of between €13 billion and €41 billion for European banks, representing 1% to 3% of their aggregate Tier 1 capital.

“In the context of the sector aggregate, this is small,” the analysts said. “By extending €91bn of refinancing facilities to Greek banks (and a further €153bn to Portuguese and Irish banks), the ECB has effectively dis-intermediated the ‘core’ banks from the periphery.”