Major international banks Wednesday voiced support for a German-led proposal to aid Greece by extending the maturities of its sovereign debt, a key component of the next financial aid package for the country.
Voluntary support from private-sector creditors should help advance the debt extension plan, which gained added attention this week following a pitch by German Finance Minister Wolfgang Schaeuble to extend Greek bond maturities by seven years in exchange for support from Berlin. French officials have also voiced support for a roll-over plan.
Senior bankers from the Royal Bank of Scotland Group PLC, Credit Suisse Group and JPMorgan Chase & Co. said they supported an extension of maturities on Greek bonds, or so-called debt reprofiling, as a necessary measure to address the country's simmering debt woes.
"Greece cannot avoid a restructuring. A maturities extension would for the first time be a help," Ingrid Hengster, head of RBS in Germany, said at a conference near Frankfurt.
Michael Ruediger, Central Europe CEO of Credit Suisse, said the debt problem must be addressed by debt reprofiling, additional bailout funds and "little wavering."
Echoing the other two managers, JPMorgan Chase's German CEO, Karl-Georg Altenburg, said the debt extension must be executed on a voluntary basis in order to avoid it being classed as a default.
The European Central Bank has warned that a default on Greek debt could force it to end its liquidity provision to Greek lenders, a move that would likely spur a domestic banking crisis.
The CEO of France's Credit Agricole SA, Jean-Paul Chifflet, said his bank would support extending Greek debt maturities.
The German banking association trade group BdB said an extension "could be a possible solution" for restructuring the country's debt, as long as Greece was still required to stick to agreed reforms and austerity measures, and that participation was voluntary.
Private-sector participation in a positive outcome for Greece "can only be a final step in a solution that's sustainable for all parties involved," said Andreas Schmitz, BdB's president. "That point hasn't yet been reached."
Of all foreign lenders, French and German banks are the most heavily exposed to Greek sovereign debt, according to recent figures from the Bank of International Settlements. Analysts said a majority of French and German banks' Greek sovereign bonds holdings fall under the lenders' so-called banking books, where securities are held to maturity rather than marked to market prices like securities held in banks' trading books.
The reaction of credit ratings agencies will be key to signing off on any extension or swapping of Greek debt for new bonds with longer maturities. Agencies have warned previously that any "material" changes to the bonds' value would constitute a default.
The ECB has strongly opposed restructuring of Greek debt, though governing council member Nout Wellink on Monday said he wouldn't rule out private-sector participation in a solution.
Barring a credit event, banks that agree to participate in an extension should be able to avoid any losses, said Christian Schulz, a senior economist at Berenberg Bank. "Everything else being equal, no change in rating or coupon, then I don't see why there should be any losses" for the banks involved, he said.
