German Banks Ready To Accept Greek PSI Terms

Tyler Durden's picture

In what should come as a surprise to nobody, German banks have announced that they will accept the terms of the Greek PSI whose outcome is due on Thursday. Because as Reuters points out, German banks already have had the time and opportunity to park the bulk of their Greek exposure with the failed German bad bank, which is explicitly funded by the government (thus making the cost to the German government even higher): "While Greek sovereign debt owned by German lenders has a face value of roughly 15 billion euros ($20 billion), in most cases they have already written down that value in their books by about three quarters. FMS Wertmanagement, the biggest creditor with an exposure of nominally more than 8 billion euros, will accept the deal, a person close to the lender said on Monday. FMS, the bad bank set up to hold the toxic assets of bailed-out former bluechip lender Hypo Real Estate, is to formally decide on accepting the debt cut later this week, the person said." German banks... German banks... where else have we seen this today? Oh yes: "Die Welt said that more than half of the 800 lenders that tapped the ECB's 3Y LTRO last week were German, consisting mainly of small savings and cooperative banks." Thank you Jim Reid - so while Bundebank's Jens Weidmann huffs and puffs about the LTRO, it is his own banks are the biggest beneficiaries, in no small part to hedge against Greek exposure. But yes - at least following the absorption of tens of billions in intermediary capital via a variety of channels, German banks can now accept a 70%+ haircut, even if they continue to complain about it in the process: "Commerzbank, which had originally invested almost 3 billion euros in Greek sovereign bonds but has written down its exposure to 800 million, said last month it had little choice but to take part in the bond swap. At the time, chief executive Martin Blessing said: "The voluntariness (of the Greek debt swap) is about as voluntary as a confession at a Spanish inquisition trial."" The Spanish Inquisition appears to have won yet again.


Deutsche Bank, which had an initial exposure 1.6 billion euros, said on Monday it would take part in the deal, which its Chief Executive Josef Ackermann helped negotiate as chairman of bank lobby group IIF.


Sources close to other big German creditors with an original Greek exposure of more than 1 billion -- such as DZ Bank and Erste Abwicklungsanstalt -- also said that the lenders would take part in the swap deal.

Also amusing is that Pimco's Bill Gross, whose firm was one of those voting unanimously to accept the terms of last week's ISDA decision, and who has been bitterly complaining about the implications of the Greek PSI for the bond market on twitter and elsewhere, has parent Allianz gladly joining the "voluntary" exchange offer:

Insurers Allianz, Munich Re and public-sector bank LBBW have yet to make announcements but are expected to join in.

In other words: all is as expected. As has been indicated for a long time, the wild card is and continues to be the hedge funds, how many firms have organized in an ad hoc blocking group, and how much of the $70 billion in gross CDS outstanding is in the form of a basic package, held tightly by funds who have no intention of participating in the PSI.

In this context, the most sought after news this week will be how many funds Bingham has managed to organize, and what is the aggregate net holdings of the ad hoc group.

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spankfish's picture

"German banks already have had the time and opportunity to park the bulk of their Greek exposure with the failed German bad bank, which is explicitly funded by the government"

Translation - German taxpayers get ready to pay up.

GetZeeGold's picture




They'll pay today......wait until tomorrows bill comes in.


I hope they know the tip is extra.


resurger's picture





withnmeans's picture

Private Investor Group DSW in Germany wants other Private Investors to not accept the bond swap. Not to mention Slovenia owns 200 mln Euros of Greek bonds "good luck Slovenia, your about to go down with the SHIP"......

Nussi34's picture

When will German trucks pick up the Greek gold? I bet the Greeks will be happy when they find out what their government signed for....

Fips_OnTheSpot's picture

Nobody expects.....

battle axe's picture

German Banks now own Greece. Nice beach front property at least...

Vince Clortho's picture

Now what shall they do about all those homesteaders on their new property?

Irish66's picture

This is so exciting, when will we know about the hedge funds, Thursday?

JPM Hater001's picture

I think we already have a good idea- From Saturday:

Law firms like Bingham McCutchen have been soliciting hedge funds, asking that they form a consortium to challenge Greece by accumulating enough of these types of bonds so that they might be able to block the deal and perhaps receive near full payment from the Greek government.

Irish66's picture

I read Peter's analysis but that was more than my pea brain could handle

resurger's picture

but they need their 100 tonnes right?! JP if it's not now, then sometime soon...

Ancona's picture

And next week they will say that hedge funds "unexpectedly" balk at getting ripped off.

youngandhealthy's picture

Hedgies will get a bloody nose from this trade because the "other side" is judge and jury. 

JPM Hater001's picture

Yes, but the bankers know if Greece has an outright hard default- clear to everyone- and they dont pay then it completely undermines the entire CDS market and everything plunges into chaos.


Chief: How can we believe a man who would sell out his friends?
Siegfried: Dumkopf! Who else are you supposed to sell out? You can't betray enemies!

firstdivision's picture

Lol!  This is the most idiotic reason for the markets to ramp, but at least it is providing amusement.  Guess everyone already forgot about China (that was so 37 seconds ago).


*edit* OT: If this isn't a harbinger of things to come, I don't know what else is

LongSoupLine's picture

That's odd...why would the big banks worry about it?  I mean, they say their balance sheets are very "healthy" and in "recovery".

resurger's picture

ISDA wouldnt give a flying fuck if those CDS were sold by European Banks

firstdivision's picture





GMadScientist's picture

I See Dead Assassins.

I Sling Dubious Accounting.

Illuminati Selective Determinism Association.

Id fight Gandhi's picture

One way or another the debt will be paid, by blood or by mana from God.

Someone somewhere will be accountable for this day in day out bullshit.

Schmuck Raker's picture

"Someone somewhere will be accountable for this day in day out bullshit."

Generations yet to be born, everywhere.

dereksatkinson's picture

The ISDA is a joke.  Why anyone is still playing that market is beyond me.

rsnoble's picture

Meanwhile here is radiated Tokyo's latest problem:

Originally I thought the title said "was shot" in the search but after looking again I see it says "was sought". Not nearly as funny but still. If I were there id also be trying to escape, who the hell wouldn't?

LongSoupLine's picture



What a great idea...I'm going to make my own bad bank and throw all my bills into it.  Everything will work out for me right?

rsnoble's picture

Your $ is probably already in a bad bank. LOL. 

mrbalfour's picture

The PSI has to be over 90% AFTER the CAC's are implimented.  It will all come down the bonds governed by the UK, per ZH.  Who is smarter - the Hedge Funds, Greece, or the Troika?  Hmmmmmm.  Not a tough one to figure out.  Who is the loudest over the last 3 months and who have we not heard from? 

If the hedge funds dont have a blocking position at this point - then this entire coversation is a waste of time (until greece is about to default again) - so you should assume they do.  The only question is what happens after everyone figures that out.

SmoothCoolSmoke's picture

Just another "fixed" vote.  I love ZH, but this delusion that votes (Greece, Germany, Slovakia, Greece, Finland, ISDA, ISDA, PSI) are going to be cast the explodes the EU (nee World) financial system needs to stop.


Sandmann's picture

Die FMS Wertmanagement ist keine Bank, kein Finanz- oder Wertpapierdienstleister und auch keine Versicherung nach der Definition des Kreditwesengesetzes oder der EU-Richtlinie 2006/48/EG.


FMS Wermanagement is NOT a Bank it is a Resolution Trust owned by the German Taxpayer.  Commerzbank is an insolvent German bank owned 25% by the German Taxpayer. It is run by Martin Blessing whose wife worked at Goldman Sachs in the group run by Paul Achleitner; the same Paul Achleitner who bought Dresdner Bank for Allianz SE (parent of PIMCO) and found it was a disaster so he unloaded it onto Commerzbank which then needed Government aid to remain solvent. To top this gem, Paul Achleitner will become Chairman of the Supervisory Board of Deutsche Bank in May. Other previous successes include trying to buy AIG with Chris Flowers (also Goldman) and putting MAN Roland into receivership


So if German Government Financial Bodies agree to dance a jig for Greece do not say it is PRIVATE Sector when it is clearly Wolfgang Schauble that has telephoned and told them to dance

eddiebe's picture

The money already got printed, so what's the problem?

Lord Welligton's picture

FMS Wertmanagement, the biggest creditor


I need new glasses.


I read that as FMS Wastemanagement.

FederalReserveBankofTerror's picture

Tyler, I have been watching this play out for quite some time now and since last November or thereabouts (could have been earlier) when shit began to melt down and Merkel said she would lead Germany out of the crisis with a shit eating grin on her face, I became quite suspicious of why she seemed to be so happy and confident she had a solution for Germany to come out on top. Would you be able to confirm if Germany is printing Duetsche Marks and if so how many have they printed.

Merkel is good cop and Wolfgang Schauble is bad cop. Merkel is doing everything within her power to keep the Euro together and Schauble says no to Euro Bonds and makes sure the Greeks can not possibley live up to a deal as payback for their extortion and violations of previous agreements. Meanwhile it would buy more time to print more DMs and distribute them. Then LTRO II comes along and I was thinking it would be quite telling if German banks take down a significant portion of the LTRO so they could get some free money to their institutions which will be the demise of the rest of the civilized world as they use the LTRO cash to line up their shorts. French banks can now be shorted. Germany can coordinate the most massive seismic shift in capital in the history of the world. The banks are isolated from Greek bonds. The banks are flush with new cash and all the Germans have to do is say we have done everything within our power to help Greece and they have failed to live up to their agreements and since there is too much risk of cascading defaults to the German financial system, Germany has decided to leave the Euro and return to the Deutsche Mark.

That single announcement, combined with the coordinated shorting of everything would test 666 on the S&P and Apple would become Apfel. I would be interested in your feedback or any holes you could find in this plan for Germany to transfer most of the worlds wealth to itself through massive shorting. Looking forward to your feedback.

FederalReserveBankofTerror's picture

Greek news and being forced to leave the Euro is to Merkel as news of the battle of Waterloo was to Nathan Mayer, Freiherr von Rothschild. This is a much more massive and insidious setup and as you say Tyler, "He who sells best, sells first".


youngandhealthy's picture

If you base your "short" on French Banks on that reasoning....sure like hell one will lose money. It will not happened, ever.

Now, short French Banks for other reassons (if possible) but not for Germany leaving Euro. Understand that Germany is a net beneficiary because of the Euro. With DMs they would not have had the "export" success and thereby the money to re-unite West and East Germany.

Jefferson's picture

Greece is definitely being set up to default. But the purpose is not to allow Germany to leave the European monetary union. Quite the opposite.

The plan is to force Europe especially Germany into political and fiscal union by creating such economic and financial chaos that no other choice is available.

By virtue of Target 2, Germany is already all in on the PIIGS debt.


Karl Napp's picture

Pointing out that more than half of the 800 lenders that tapped the ECB's 3Y LTRO last week were German banks is misleading because only 10% of the 3Y LTRO went to German banks (German banks balance sheet total is 25% of the balance sheet total of all European banks). Most of the money (26%) went to Italien banks (10% balance sheet total).

neverm0re's picture

You really should improve your information in regard to the situation in Germany. You're frequently completely off base in your comments of what's happening in German government circles.

Now you're off base again. Mostly small savings banks and cooperative banks. None of those is exposed to Greek liabilities.