* Swiss Greece exposure drops to $3.6 bln from $64 bln
* Greece's EFG Eurobank was recorded as Swiss bank in past
* Change highlights pitfalls in BIS banking statistics
By Boris Groendahl and Albert Schmieder
VIENNA/ZURICH, April 29 Swiss banks' exposure to
Greece dropped to $3.6 billion from $64 billion in the three
months to December, and this time it's not wayward Greek
The whopping, yet mystifying drop in foreign claims on Greek
borrowers shows up in the Bank for International Settlements'
quarterly banking statistics, 104 pages of endless number
columns that chart global banks' international exposures.
The most recent data, which are up to date as of December
2009, were published last week. When analysts turned to the file
to assess the possible damage of a Greek debt restructuring
after Tuesday's S&P ratings downgrade, some were puzzled by the
massive change. [ID:nLDE63R0Y1] [ID:nLDE61A1VT]
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 EFGr.AT.
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.
So it came that EFG's Greek loans were, in the eyes of the
BIS statistics, an exposure of a Swiss bank, thus inflating by a
factor of 15 a number that at the new level of $3.6 billion
reflect better what "real" Swiss banks hold in Greek debt.
In Luxembourg, however, EFG's holding company does not have
a banking license, which means that Luxembourg does not report
this company's consolidated foreign exposure to the BIS.
Hence, the exposure formerly known as Swiss did not move
anywhere else, it dropped out of the picture. The total exposure
of European banks to Greece fell to $189 billion according to
the BIS' December data, from $253 billion three months earlier.
In this case, the change does make the new set of data more
EFG -- which does have a small Swiss sister bank, EFG
International (EFGN.S), owned by the same holding company -- is
seen by market participants as a domestic Greek, not a foreign
Swiss bank. If anything, the old numbers were misleading.
But the change once highlights pitfalls of the BIS data,
which are a unique and extremely useful resource for analysts
and economists, but require a close knowledge of how they are
compiled to avoid gross misunderstandings.
Emerging European policymakers and some economists blamed a
mistaken reading of the same BIS statistics for spooking markets
last year by overstating the exposure Western Europe's banks
have in the former Communist east.
In this case, too, the BIS numbers were not inaccurate, but
were open to a superficial interpretation because they do not
differentiate between cross-border claims and claims by banks'
local subsidiaries, which tend to be covered by local deposits.
Taking into account that 60 percent of it was via local
subsidiaries, Europe's $1.5 trillion exposure to emerging Europe
looked much more manageable, because the local deposits meant
that not all of that had to be refinanced on wholesale markets.
(Additional reporting by Robin Bleeker in Geneva)