Wall Street Journal
February 17, 2012
The European Central Bank has completed an exchange of Greek bonds it bought starting in 2010 for new bonds from the Greek government that shield the central bank from incurring losses, paving the way for a massive debt-relief operation Monday, a euro-zone official said Friday.
The swap applied only to the roughly €50 billion in Greek bonds purchased via the ECB's nearly two-year-old bond-purchase program, which is aimed at making sure the bank's interest-rate policies transmit smoothly through the economy.
The operation doesn't include the estimated €12 billion in other Greek bonds held by individual central banks as investments, the official said. National central banks that hold Greek bonds separately from the ECB's Securities Market Program, or SMP, will have to negotiate individually with the Greek government to protect those bonds against losses, the official said.
The ECB's bond swap aims to draw a clear legal distinction between those bonds bought by the central bank as part of its monetary policy, and €200 billion in bonds held by private creditors, which are due to be restructured, slashing their value.