ECB would accept Greek debt unless all the three rating agencies downgrade it

The European Central Bank made a statement that it would further accept Greek debt as collateral for loans unless all the major credit rating agencies inclusively declare it to be in default.

The ECB said it would rely on the principle of using the best rating available from the agencies – Standard & Poor’s, Moody’s and Fitch – the official said.

Earlier S&P’s warned that a plan supported by Germany and France for banks to roll over their holdings of Greek debt into new bonds would constitute a “selective default”.

Besides, Fitch also stated it is likely to call a rollover a default. But Moody’s has yet to comment. If only one of them does not downgrade Greece, the ECB could continue to prop up the Greek banking system.

French and German officials said they were not unduly concerned by the S&P statement. They underlined that a rollover was unlikely to constitute a so-called credit event, which would trigger payments on credit default swaps, a form of insurance against default.

“The important thing is that we avoid a credit event, with all the resulting negative impact on credit-default swaps which occupied us after the Lehman bankruptcy,” a German official said.