Swiss banks' exposure to Greece dropped to $3.6 billion from $64 billion in the three months to December, and this time it's not wayward Greek statisticians' fault.
The whopping, yet mystifying drop in foreign claims on Greek borrowers shows up in the Bank for International Settlements' quarterly banking statistics, 104 pages of endless number columns that chart global banks' international exposures.
The most recent data, which are up to date as of December 2009, were published last week. When analysts turned to the file to assess the possible damage of a Greek debt restructuring after Tuesday's S&P ratings downgrade, some were puzzled by the massive change.
None of the parties involved in compiling the statistics agreed to go on the record, but several officials confirmed that the change in the Swiss exposure was due to a reclassification of Greek bank EFG Eurobank <EFGr.AT>.
The BIS statistics show claims based on the nationality of the lender's "ultimate owner".
EFG, Greece's No. 3 bank by assets, is controlled by Greek billionaire Spiros Latsis via a holding company, which until last year was based in Geneva and has since moved to Luxembourg.
So it came that EFG's Greek loans were, in the eyes of the BIS statistics, an exposure of a Swiss bank, thus inflating by a factor of 15 a number that at the new level of $3.6 billion reflect better what "real" Swiss banks hold in Greek debt.
In Luxembourg, however, EFG's holding company does not have a banking license, which means that Luxembourg does not report this company's consolidated foreign exposure to the BIS.
Hence, the exposure formerly known as Swiss did not move anywhere else, it dropped out of the picture. The total exposure of European banks to Greece fell to $189 billion according to the BIS' December data, from $253 billion three months earlier.
In this case, the change does make the new set of data more realistic.
EFG — which does have a small Swiss sister bank, EFG International <EFGN.S>, owned by the same holding company — is seen by market participants as a domestic Greek, not a foreign Swiss bank. If anything, the old numbers were misleading.
But the change once highlights pitfalls of the BIS data, which are a unique and extremely useful resource for analysts and economists, but require a close knowledge of how they are compiled to avoid gross misunderstandings.
Emerging European policymakers and some economists blamed a mistaken reading of the same BIS statistics for spooking markets last year by overstating the exposure Western Europe's banks have in the former Communist east.
In this case, too, the BIS numbers were not inaccurate, but were open to a superficial interpretation because they do not differentiate between cross-border claims and claims by banks' local subsidiaries, which tend to be covered by local deposits.
Taking into account that 60 percent of it was via local subsidiaries, Europe's $1.5 trillion exposure to emerging Europe looked much more manageable, because the local deposits meant that not all of that had to be refinanced on wholesale markets.
