BNP PARIBAS, the bank most exposed to euro zone sovereign debt, has sold off €11 billion of Italian, Spanish and Irish government bonds and written down 60 per cent of the value of its Greek holdings, contributing to a 72 per cent fall in third-quarter profits. Investors have seen the exposure of France’s biggest bank to the highly indebted countries of the euro zone as its Achilles heel, given the crisis over a rescue plan for the region.

BNP took a €2.2 billion hit on the 60 per cent writedown of the value of its €3.5 billion exposure to Greek sovereign debt. The writedown was higher than last week’s EU deal for a 50 per cent haircut, as BNP sought to demonstrate it could absorb a bigger impairment.

Baudouin Prot, chief executive, said BNP would be able to take another hit to its residual €1.6 billion of Greek holdings, but ruled out participating in any future private-sector plan for Greece, saying the implementation of last month’s plan was “shrouded in uncertainty”.

Mr Prot said the sovereign debt sales – which follow similar moves by ING and Barclays – was due to regulators’ demands that banks mark their holdings to market values from next year. He said the bonds had been sold into the market.

The sale of the sovereign bonds cost €812 million, of which €362 million was taken in the third quarter, with the remainder due to be booked in the fourth.

Mr Prot rejected worries of contagion: “Greece is, and will remain, an exception.”– (Copyright The Financial Times Limited 2011)