More Greek musings

In most changes the "big picture" is good enough, but the devil is in the detail; that is where the problems come to light. It seems to me that in this case of breaking Greece out of the Euro there are serious problems in the "big picture", ones that will only compound in the detail.

The big question is how one draws the lines around the assets and liabilities that will comprise the New Drachma?

When we created the Euro it was easy. ANY & EVERY asset and liability in each of the component currencies were converted. In this instance, just SOME of the Euro will be broken out, but what and where.

Simple domestic Greek assets and liabilities are not the problem. It is the more international , well inter-eurobond elements that create the challenge. Imagine a Greek company that legitimately and reasonably took out a euro loan with a Belgian bank (I will avoid using Germany as the example) and then used it across its European operations, with the balance held in a head office account with a Greek bank in Athens.

It would seem that the portion in Athens is a no brainer, but what about assets in France that were funded by the loan? Similarly can one force the lending bank in Belgium to rede imitate its loan to New Drachma, with all that could imply?

Unless we corral all the relevant assets and liabilities we will have an unbalanced set of accounts. What do we do with the mismatch?

I will keep thinking and reading around this until it becomes clear.

Whatever happens it seems that identifying Greek domicile will be critical. For the banks this will hinge upon the static data held for clients, instruments and accounts. Now we know how notoriously inconsistent that data is. We spent months cleansing the data before creating the Euro, but we will not have the same rump here.

I know that a number of Banks are already in data clean up mode for KYC (know your customer) requirements, but expect it to take years. I am also aware of many debates around idmetifying the country of issue for a number of instruments , especially for larger supranational organisations.

Now while the first point still means I don't think we know the boundaries, I think it is clear that there needs to be an urgent focus on everything that looks as if it could be "Greek" and ensuring that the data held is correct and consistent. That way when the apparently inevitable happens one can at least have a reasonable set of data to work with.

More musings later.