Banks prepare for 60% Greek loss

GERMAN banks are preparing for losses of as much as 60% on their Greek government debt holdings as European officials push for more private-investor involvement in a rescue of the debt-stricken country.

The country’s banks held a conference call this week and participants discussed the potential for losses on Greek bonds of between 50% and 60%, according to three people, who declined to be identified because the talks are private.

Deutsche Bank AG (DBK) chief executive Josef Ackermann, who led talks in July when Europe’s banks and insurers agreed to a voluntary loss of about 21%, said he’ll go to Brussels next week to discuss the potential for a bigger reduction.

Jean-Claude Juncker of Luxembourg who heads the group of euro-area finance ministers, said separately that talks are under way with the Institute of International Finance, which Ackermann chairs, on the cost to investors of a second Greek bailout.

Greek 10-year government bonds are trading at about 40% of face value. Some German lenders have already written down Greek holdings to market levels, while lenders that booked smaller writedowns may face further losses, one person said.

Increased private-sector involvement may be part of a larger EU package aimed at stemming the spread of the sovereign debt crisis. An October 23 summit of euro leaders looms as a deadline for a breakthrough in combating the crisis — which has driven Greece toward default — rattled world markets and dented confidence in the survival of the euro.

European Commission president Jose Barroso called yesterday for a reinforcement of crisis-hit banks, the payout of a sixth loan to Greece and a faster start for a permanent rescue fund.