New official ruling leads to no insurance pay-out on Greek swaps

This article was last updated on April 16, 2022

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The International Swaps and Derivatives Association (ISDA) have said today that the current evidence regarding the Greek bailout tell that the payments on the credit-default swaps linked to the country’s bonds would not be prompted.

The new ruling uses to declare the holders of these insurance contracts, worth a net $3.25bn, will not receive any payment at the current stage, though there is still a possibility to impose further rulings based on any new queries.

ISDA was asked to consider whether a ‘credit event’ had occurred as a result of new Greek legislation that could force all bondholders to accept losses and after the European Central Bank (ECB) took steps to avoid losses on its Greek bonds.

As a result, 15 ISDA committee members voted unanimously that this did not meet the ISDA definition of a credit event. Whereas, the Europe, Middle East and Africa determinations committee said in a statement: “The situation in the Hellenic Republic is still evolving and today’s EMEA DC decisions do not affect the right or ability of market participants to submit further questions to the EMEA DC relating to the Hellenic Republic nor is it an expression of the EMEA DC’s view as to whether a Credit Event could occur at a later date, in each case, as further facts come to light.”

The news regarding refusal of occurrence of a credit event will delight EU leaders who are desperately avoiding to mention any kind of default.

However, ISDA has further illustrated the Greek situation that was still evolving and further questions relating to the debt-laden nation could possibly be submitted. The body is of the view that within the light of the further facts, a credit event would possibly occur at a later stage.

The ECB has temporarily suspended the eligibility of Greek sovereign bonds as collateral for bank loans. It will probably start accepting Greek bonds again by mid-March when new measures to insure the ECB against losses will be implemented.

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