European banks and insurers moved closer on Friday to a voluntary rollover of their Greek government debt holdings, hoping to get around rating agencies' reservations and avoid a Greek default.

National finance officials are discussing with banks and insurers a proposal to replace existing Greek debt with a different type of bond in a deal they hope will persuade credit rating agencies to refrain from declaring Athens in default of its obligations, two senior European banking sources told Reuters.

The proposal foresees a voluntary rollover of debt into securities of a different and not comparable credit composition to avoid agencies moving Greece to default status, the sources said.

Only by a completely different composition of the bonds would the rating agencies see the restructuring as voluntary and not declare Greece insolvent, said one senior German banker.

Euro zone governments are discussing a second bailout package for Greece that would run from 2011 to 2014 and could amount to 120 billion euros ($170 billion), including up to 30 billion euros from the private sector.

French President Nicolas Sarkozy and Spanish Prime Minister Jose Luis Rodriguez Zapatero said their banks and insurance companies were willing to participate in a voluntary rollover.

Greek banks are also on board and a financial source told Reuters on Thursday that Franco-Belgian banking group Dexia, which has about 5.4 billion euros in exposure to Greek bonds, was also ready to take part, following talks with Belgium's central bank.

The senior German banking source said lenders in that country were still examining a variety of proposals and that they would not agree to commit to any rollover deal without a signal from ratings agencies that there would be no default.

Only if the conditions are better than the ones up to now could you reckon with a substantial contribution from the banks, the source said.

Concerns about European banks' exposure to Greece are in focus ahead of stress tests of 90 lenders which are expected to be released on July 13.

Europe's banks have to resubmit data in the coming days to Europe's top banking watchdog, the European Banking Authority. Some have been told their estimates of losses on Greek debt were too benign and they need to plug in bigger potential hits.

Greek's banks have the biggest holdings of Greek government debt, and followed by Germany's state-owned bad bank FMS, with 7.4 billion euros.

Other international firms with holdings of over 1.5 billion euros include BNP Paribas , Generali , Commerzbank , Societe Generale , Groupama, CNP, AXA and Deutsche Bank , according to estimates by Barclays Capital analysts.


Banks, insurers and national finance officials have held meetings this week to explore options for a rollover.

The talks mainly involved bond specialists and legal experts, though in some countries, such as Belgium and the Netherlands, board level executives were involved, sources familiar with the proceedings said.

In Austria, no discussions have taken place because company officials are worried any premature agreement could open executives to shareholder lawsuits, a concern echoed elsewhere.

A meeting in Frankfurt on Wednesday, called by the head of the Finance Ministry's Europe department and former head of insurance supervision at watchdog Bafin, Thomas Steffen, was cut short by a severe rainstorm, but officials were able to hold a teleconference on Friday.

German private creditors have been asked by the Finance Ministry to submit spreadsheets with data on their Greek exposure and their intentions to roll over the debt by Sunday, evening, two sources familiar with the meetings said.

Germany and France, along with Greek banks themselves, are the biggest holders of Greek state debt and therefore most exposed to any default.

Speaking at a summit of EU leaders in Brussels, German Chancellor Angela Merkel said there were as yet no hard numbers for what would constitute a substantial role for the private sector -- as euro zone governments have urged -- in resolving Greece's financial problems.

I don't want to comment on the current state of these talks, I think it's most important for us to have these talks first and then report to you the results, Merkel told reporters. I don't think it would be wise to give you any numbers. We don't have any hard numbers as of yet.

Euro zone policymakers are keen to make private bondholders share the cost of a second Greek rescue to follow the 110 billion euro bailout granted last year, but they have so far failed to agree how to without triggering even worse turmoil in financial markets.

Ratings agency Fitch has said even a voluntary rollover could be classified as a default as far as it is concerned.

(Additional reporting by Jonathan Gould, Michael Shields and Steve Slater; Editing by Mike Peacock, John Stonestreet)