Wednesday, July 6, 2011

Moody's Gives Banks Greek Debt Warning


LONDON—Banks rolling over some of their Greek debt into new instruments may have to take impairment charges, Moody's Investors Service said Tuesday, in another setback for efforts to involve private bondholders in a new international bailout.

Rival rating firm Standard & Poor's Corp. on Monday rocked plans to involve the private sector in giving Greece more time to work out its fiscal problems by saying a proposal being promoted by French banks would likely put the country in "selective default."

Moody's still hasn't explicitly said the plan would result in a default. Tuesday it said it's "not a party to ongoing discussions on the Greek debt rollover," and that "any rating implications will be assessed through our published methodologies and definitions," only after authorities complete a plan.

The ratings firms' reaction to the French proposal is being regarded as a crucial element in whether it will proceed or not, because euro-zone and European Central Bank officials have repeatedly said they want a deal that doesn't result in Greece's getting a default rating. It could also affect the ECB's willingness to accept Greek bonds as collateral, which has been vital in keeping the Greek banking sector functioning during the on

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