As Greece moves towards a referendum on its debt repayment terms on July 5, the country’s future seems more uncertain than ever. The imposition of capital controls in Greece, the closure of the Athens Stock Exchange and the capping of Emergency Liquidity Assistance by the ECB (resulting in the temporary closure of its banks) are already causing financial and economic dislocation. In these circumstances, all index providers are considering how best to treat Greece in their global indexes.
In keeping with its transparent and consultative model of index governance, FTSE has instituted a consultation with clients and other stakeholders to assess the impact of the capital controls and the closure of the stock exchange. This assessment will, of course, also take into account the likely duration of these events in the light of the outcome of the referendum. On the basis of this consultation, FTSE will determine whether Greek securities should remain in its global indexes (including GEIS) or if conditions warrant their removal and if so, at what price. If it is determined that Greek securities should be removed from the global indexes, FTSE will create individual Greek indexes for those clients that require them.
It is worth noting that the imposition of capital controls does not automatically mean that FTSE will demote Greece from its Developed country classification status. That is a longer term decision. Greece’sstatus will be reviewed as part of the annual country classification process in September. If Greece were to be removed from FTSE Russell indices prior to the September country classification meeting as a result of capital controls, then it would have to go through the classification process as a new market before it would be reconsidered for index eligibility.
As always, FTSE will keep its clients and the markets fully informed of its deliberative process and decisions in good time.
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