FRANKFURT (MNI) – The European Central Bank should clarify whether it is
ready to drop the senior creditor status for Greek bonds purchased under the
retired bond buy program SMP, the International Institute of Finance (IIF) said
Wednesday.
“The ECB should clarify what will happened to bonds bought under the SMP,”
IIF Deputy Managing Director Hung Tran said during a press briefing. The IIF
also said that the Eurozone’s bailout fund ESM provision that essentially grants
it preferred creditor status second only to that of the IMF “needs to be
clarified as soon as possible.”
IIF Managing Director Charles Dallara welcomed the ECB’s announcement that
for any bonds bought under its new bond buy program OMT will accept the same
(pari passu) treatment as private or other creditors. “I think there is growing
recognition that priority status in the future is going to lead to more problems
than it solves,” Dallara said.
In a report of the Joint Committee on Strengthening the Framework for
Sovereign Debt Crisis Prevention and Resolution, the IFF warned of any legal
tricks in debt restructurings going forward.
“Retroactive legal changes to unilaterally modify the terms and conditions
of financial contracts may undermine the integrity of financial markets and the
sanctity of contracts and should be avoided,”
the IIF warned.
When Greece restructured its debt last year, the ECB in a last minute
operation had swapped its Greek bond holdings accumulated under the bond buy
program SMP for new ones that were immune to collective actions clauses.
“Sovereign issuers should treat fairly and provide comparable treatment to
all creditors so as to avoid discrimination against any individual or groups of
creditors. No creditor or creditor group should be excluded ex ante from
participating in debt restructuring,” the IIF said.
** MNI Frankfurt bureau tel.: +49-69-720142 **
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