Bailout

Switzerland?s non-exposure to Greece

By Felix Salmon

Remember all those Swiss banks with massive exposure to Greece? Er, never mind. The WSJ’s Brian Blackstone has* this great little chart, which shows Switzerland’s $79 billion of exposure falling by 95% between the third and fourth quarters. He’s got to the bottom of what exactly happened, too. And it has nothing whatsoever to do with CDS:

Eurobank EFG is based in Athens, listed on the Athens stock exchange and has roughly 1,600 branches in Greece and other countries in Central, Eastern and Southern Europe. It is controlled by EFG Group, a holding company that is indirectly controlled by the billionaire Latsis family of Greece.

Until recently, EFG Group had its headquarters in Switzerland…

It is unlikely that the bank posed any significant financial risk to Switzerland. Like all Greek banks, its deposits are insured by the Greek government.

Eurobank EFG’s exposure was classified as Swiss because its parent company was based in Switzerland. In the fourth quarter, the parent company underwent a restructuring; EFG Group is now based in Luxembourg but not classified as a bank there.

It seems that the BIS itself is in dire need of moving from a rules-based to a principles-based regime. EFG is a Greek bank, it was always a Greek bank, and it should always have been reported as such. If some narrow-minded bureaucrat decided that the rules meant that it had to be reported as Swiss, then obviously the BIS should have changed the rules. It’s worth asking why that never happened.

Update: Reuters had it first. And I think, although BIS statistics are very confusing, that what we’re looking at here is double-counting: EFG showing up in both the Greece and the Switzerland statistics. Until Q4, at which point it was just Greece.

Update 2: Or maybe Alphaville had it first.

Full post as published by Macroprudential on April 30, 2010 (boomark / email).