Greece central bank thinks it will make profits on its Govt. Bond portfolio..

I am not sure how to react to this.

Greece CB recently asked ECB for its opinion on some legal changes happening in GCB.

As regards the operation, tasks and distribution of profits of the Bank of Greece, the proposed amendments:

  • (a) extend the duration of the Bank of Greece from 2020 to 2050;
  • (b) enable the Bank of Greece’s General Council to convene and take action with special composition in relation to urgent matters;
  • (c) expressly entrust the Bank of Greece with macro-prudential authority;
  • (d) specify for the financial years 2012-2020 the way in which the income of the Bank of Greece stemming from Greek government bonds forming part of its investment portfolio on 31 December 2011 will be transferred to the Greek State.

Income from Greece govt bonds? I was checking the GCB balance sheet for 2011 and they seem to be owning around EUR 6.7 bn of Greece govt. bonds. They will be lucky if they get half of that amount. And guess what?  Capital +  Reserves of GCB is just EUR 815 mn. So a 50% loss on these bonds is enough to wipe the whole capital and reserves.. GCB should instead be asking ECB how to escape this probable loss..:-)

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