Banks ‘Quietly’ Lobby BRICs for Greece Aid

By Christine Harper - Sep 17, 2011 4:41 AM GMT+0700

A group that represents the world’s biggest banks is trying to persuade Brazil, Russia, India, China and others to lend 20 billion euros ($27.6 billion) to supplement a debt refinancing package for Greece.

The Institute of International Finance Inc. has been “quietly exploring” whether the so-called BRIC countries and others would be willing to participate, IIF Deputy Managing Director Hung Tran said today in a telephone interview. The plan would add to a July 21 agreement that included debt buybacks and bond exchanges, he said.

“If you have the extra 20 billion which we are seeking from other countries, that of course would increase the amount of debt retirement that Greece can have,” Tran said. “We have been in preliminary discussions with some countries and the reaction we received is an open mind and request for more information and discussion.”

The IIF, which represents more than 400 of the world’s banks, insurers and investment companies, has also shared its proposal with the International Monetary Fund, Tran said. Conny Lotze, a spokeswoman for the IMF in Washington, declined to comment. Dow Jones Newswires reported on the proposal earlier.

About half of the IIF’s members are European-based financial institutions and the Washington-based organization’s chairman is Josef Ackermann, chief executive officer of Deutsche Bank AG (DBK), Germany’s largest bank. European banks are some of the biggest holders of Greek debt and the July 21 package includes a bond exchange that would lead to writedowns on the banks’ Greek debt.

Government Debt

Concerns about lenders’ potential losses on their holdings of government debt from Greece and other so-called peripheral European countries such as Portugal, Ireland, Italy and Spain have weighed on their stock prices. The 46-company Bloomberg Europe Banks and Financial Services Index has dropped 32 percent this year, led by banks in Portugal, Germany, Italy, France and Spain.

Finance ministers from Brazil, Russia, India, China and South Africa will meet in Washington on Sept. 22 to discuss whether they will assist Europe. Tran said the meeting is a positive sign that the countries, which have some of the fastest-growing economies in the world, understand that the crisis in Europe could also affect them.

“It shows awareness among countries in the global economy that the sovereign debt crisis in Greece and other peripheral countries of Europe do have an impact on the well being of the global economy and therefore should be resolved as quickly as possible,” he said.

Tran said an IMF aid package to Latin American countries in the late 1980s also included co-financing from Japan’s Export- Import Bank. “So we want to use that as a template to try to explore if other countries are willing to do the same vis-a-vis Greece this time,” Tran said.

The IIF will hold an annual membership meeting in Washington from Sept. 23 to Sept. 25 that will coincide with the IMF and World Bank Group’s annual meetings there.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.