FT Alphaville noted on Wednesday how Swiss banks’ exposure to Greek debt mysteriously dropped to $3.6bn from $64bn in the three months to December.
This was due to a change in the treatment of a division of EFG Group – what might be described as a Greek-Swiss banking conglomerate.
Reuters follows up the story on Thursday with a little more colour and detail.
As they observe:
None of the parties involved in compiling the statistics agreed to go on the record, but several officials confirmed that the change in the Swiss exposure was due to a reclassification of Greek bank EFG Eurobank. The BIS statistics show claims based on the nationality of the lender’s “ultimate owner”. EFG, Greece’s No. 3 bank by assets, is controlled by Greek billionaire Spiros Latsis via a holding company, which until last year was based in Geneva and has since moved to Luxembourg.
They add that because EFG’s holding company does not have a banking license in Luxembourg, the Greek debt exposure doesn’t have to be reported to BIS at all. The claims simply vanish off the BIS books.
The wire concludes that this actually makes the data on European banks’ exposure more accurate, since EFG ‘is seen by market participants as a domestic Greek, not a foreign Swiss bank’.
Overall, it throws up a cautionary tale to analysts interpreting BIS foreign claim data — reminiscent of the confusion caused when the data was used to assess European banks’ exposure to eastern European banks last year.
However, it also sheds light on the interesting entity of EFG itself, the bank’s Swiss associations, and its Greek tycoon owner Spiros Latsis, who is a scion of the Latsis shipping magnate family (with ties to Paris Hilton, no less).
Keeping that in mind, readers might recall the internal memo sent round by an anonymous Greek city employee earlier this year. It discussed the sad irony of Greece’s debt situation in light of the personal wealth held by some citizens outside of Greek borders.
We’d note a further irony, now that Greece faces a European bailout — the EFG billionaire’s own close friendship with European Commission president José Manuel Barroso.
Barroso’s tendency to holiday on the Greek billionaire’s yacht, for example, has been well documented by the European press. In 2005, German news reports argued that these vacationing habits presented a conflict of interest for the commissioner, who at the time was overseeing shipping anti-trust cases.
As the FT noted at the time, the ‘yacht-gate’ scandal was even seen as a key factor behind Barroso’s relinquishment of such duties. However, the FT also reported that Barroso himself strongly denied the two things were ever connected:
A Commission spokesman added: “There was no conflict of interest – there is no connection with his holiday. He has a very heavy workload.” But the timing of Mr Barroso’s decision is likely to reignite the controversy over his holiday as a guest on a yacht belonging to Spiros Latsis, son of John Latsis, the Greek shipping magnate.
Nevertheless, it seems Latsis might possibly owe Barroso a favour or two to make up for the media circus.
Perhaps a subtle promise from EFG to keep buying Greek bonds will suffice?
Peter Mandelson oligarch Oleg Deripaska linked to mafia boss - The Times
Who’s exposed to Greece? - FT Alphaville
Buiter on Greece and a blueprint for a new Europe – FT Alphaville
Who’s exposed to Greece? (II) – FT Alphaville