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EU Exposures
EU Exposures
This has been a problem for Greek banks, which, at the end of last year rushed to issue €25bn of
government guaranteed bonds to meet new, more punitive collateral requirements by the ECB. The
Greek government has just extended state‐guarantees to Greek banks by another €30bn, on top of
€55bn of outstanding state‐guaranteed bank bonds. It appears that one Greek bank has already made
use of the new €30bn liquidity package, issuing €1bn of government‐ guaranteed paper this week.
To the extent that this extra €30bn is being used by Greek banks, it will mean that from the €140‐150bn
of collateral that Greek banks have posted with the ECB so far, almost all of it will be government‐
related collateral (€85bn of stateguaranteed bank paper, €45bn of Greek government bonds owned by
Greek banks and €8bn of zero‐coupon bonds which the Greek government had lent to Greek banks in
2008). The huge exposure to government‐related collateral puts the ECB at a huge disadvantage in the
event of government restructurings/defaults.
FT Alphaville highlights a note from JP Morgan, which suggests that the indirect exposure of the ECB to
the Greek state is massive ‐ and then we mean massive. JPM estimates that Greek banks have posted
almost €140bn in state related collateral with the ECB (€85bn of state guaranteed bank paper, €45bn of
Greek government bonds owned by Greek banks and €8bn of zero‐coupon bonds which the Greek
government had lent to Greek banks in 2008). Combining this with the direct holdings of government
debt (thought to be around €60bn, as we noted in our paper on Greece) you get total exposure of the
ECB to the Greek state of around €200bn.