(Updates with bank shares in fourth paragraph.)
Oct. 13 (Bloomberg) -- Deutsche Bank AG Chief Executive Officer Josef Ackermann, who led talks on private sector involvement in Greece’s rescue package in July, will go to Brussels next week as policy makers push investors to take deeper losses on their Greek sovereign debt holdings.
“I led the negotiations at the summit in Brussels and will be there again next week because there are efforts to re-open it,” Ackermann, chairman of the global bank lobby group Institute of International Finance, said today in a speech in Berlin. “That would mean an increase from the 21 percent we voluntarily said we’d do as investors, and it wasn’t easy at all to convince the investors to take that loss.”
European leaders are debating whether to push bondholders to accept losses on Greece’s sovereign debt that go beyond the 21 percent agreed on in July to make the country’s debt burden manageable. Ackermann said banks may be forced to restrict lending “due to possible debt haircuts in the euro zone.”
Bank shares tumbled, led by BNP Paribas SA and UniCredit SpA, on speculation that policy makers will make lenders raise more capital. The 46-member Bloomberg Europe Banks and Financial Services Index fell as much as 3.9 percent, extending this year’s drop to 29 percent. French lenders BNP Paribas and Credit Agricole SA plunged as much as much as 9.2 percent and 7.4 percent, respectively. Italy’s UniCredit slid as much as 12 percent and Deutsche Bank 6 percent.
Oct. 23 Summit
Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said separately today that talks are under way with the Washington-based IIF on the cost to investors of a second bailout package for Greece.
Increased private sector involvement may be part of a larger European Union package aimed at stemming the spread of the sovereign debt crisis. An Oct. 23 summit of euro leaders looms as a deadline for a breakthrough in combating the crisis, which has driven Greece toward default, rattled world markets and dented confidence in the survival of the 17-nation currency.
European Commission President Jose Barroso called yesterday for a reinforcement of crisis-hit banks, the payout of a sixth loan to Greece and a faster start for a permanent rescue fund to ease Europe’s debt woes.
Banks may be required to maintain a 9 percent capital buffer to absorb sovereign risks, up from the 5 percent core capital level used in July’s stress tests, a person with knowledge of discussions at the European Union’s top banking regulator said yesterday.
European finance ministers are considering setting a new timetable for banks to strengthen their balance sheets under the Basel III framework, a French official said today. Asked if a 9 percent Tier 1 capital ratio, a key measure of financial strength, would be acceptable, the official said “yes.”
--With assistance from Mark Deen in Paris and Stephanie Bodoni in Luxembourg. Editors: Steve Bailey, Stephen Taylor
To contact the reporters on this story: Nicholas Comfort in Frankfurt at email@example.com; Aaron Kirchfeld in Frankfurt at firstname.lastname@example.org
To contact the editors responsible for this story: Frank Connelly at email@example.com; Edward Evans at firstname.lastname@example.org