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Sunday 4 December 2016

ECB sued over Greek debt restructuring

Mehreen Khan

Published 05/10/2015 | 02:30

A group of Italian retail investors are claiming damages in excess of €12m from the ECB for an alleged violation of its 'equal' creditor status during the biggest private sector debt restructuring in history in 2012
A group of Italian retail investors are claiming damages in excess of €12m from the ECB for an alleged violation of its 'equal' creditor status during the biggest private sector debt restructuring in history in 2012

The European Central Bank is being sued by more than 200 investors over its role in Greece's debt restructuring, in a case which could pave the way for a raft of legal action from the private sector.

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A group of Italian retail investors are claiming damages in excess of €12m from the ECB for an alleged violation of its "equal" creditor status during the biggest private sector debt restructuring in history in 2012. During the episode, the ECB was able to "swap" its holdings of Greek government debt for protected bonds with no repayment date. The move ensured the ECB did not suffer losses from the deal to stave off a Greek bankruptcy in March 2012.

Private sector creditors, however, were forced into accepting a 53.5pc "haircut" on their holdings. In total, the restructuring wiped off more than €100bn from the country's debt pile and ensured Greece received its second international bail-out.

The ECB also later allowed national central banks to repurchase Greek government debt at a discounted rate.

The claimants in the case - Accorinti and Others - argue these actions gave the ECB unfair preferential treatment and imposed heavier losses on non-official debt holders. A judgment is expected at the EU's general court in Luxembourg on Wednesday. If granted, the action could pave the way for a number investors to launch similar claims for damages against the central bank.

Private sector creditors will have to "establish the ECB's liability for the negative impact on their bond holdings and central bank's transactions, which kept it out of the partial write-down of Greece's privately-held debt," said Hubert De Vauplane at Kramer Levin Naftalis law firm. (© Daily Telegraph, London)

Telegraph.co.uk

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