Greece’s central bank on Sunday said the country’s main four lenders would be recapitalized separately, a move that put on hold a planned merger between two of them.
“The Bank of Greece confirms that the recapitalization process for the four systemic banks [National Bank, Alpha, Eurobank and Piraeus] is proceeding normally and will conclude in April in any case,” the central bank said.
“All four banks have already called — or will call in the coming days — shareholder meetings to approve capital increases,” it added.
National Bank and Eurobank were several months into a merger process that foresaw a joint recapitalization.
However, a Greek finance ministry source said on Sunday: “Further procedures [on the merger] are suspended.”
Greece’s so-called troika of creditors — the EU, IMF and the European Central Bank (ECB) — had reportedly expressed concern that the new NBG-Eurobank entity would both dominate the Greek market and would be tough to recapitalize.
“[The creditors] do not like the creation of such a major player with a market share of around 40 percent,” Bank of Greece Governor George Provopoulos said in a televised interview last week.
“The troika says, and I can also say, that there will be a greater difficulty in a combined National Bank-Eurobank entity, with capital needs in the order of 1.5 billion euros [US$1.94 billion] or slightly higher, a very large sum under the current circumstances. So there is a concern that if private investors cannot be found, it will come under state control,” he told state television NET.
The Bank of Greece announcement on Sunday came after new talks between the creditor representatives and Greek Prime Minister Antonis Samaras on Sunday.
Their report will determine whether Athens will receive a loan disbursement of 2.8 billion euros pending since last month.
The recapitalization of Greek banks, who took a major blow last year in helping the country reduce its sovereign debt, is a condition for the continued release of EU-IMF rescue loans for Greece’s crisis-hit economy.
A sum of 50 billion euros out of the total EU-IMF bailout fund of 240 billion euros has been earmarked for this purpose.
Under the original plan, at least 10 percent of new capital was to come from private investors to keep the banks from being effectively nationalized.
This now seems unlikely for National Bank and Eurobank, who will need the full support of the Hellenic Financial Stability Fund, a source close to the process said.
“National Bank and Eurobank have admitted that they will be unable to raise the money,” the source said.
The Bank of Greece said the stability fund would “fully” cover the capital increase for each bank.
However, a source close to the process said that the 10 percent rule “was still available” to whichever bank managed to raise the necessary funds privately.
Alpha Bank has called an emergency meeting of shareholders for Thursday.
Piraeus Bank will follow suit on Friday.
The Bank of Greece governor said in his interview that even if a bank had to turn to the Hellenic Financial Stability Fund for help, “it’s not exactly state control.”
“In the Stability Fund there is ECB representation, and the EU Commission, and the troika has oversight. In no way would the troika want a major bank to operate as a traditional [state] bank. I am also concerned and would not want it to happen. I do not think it will,” Provopoulos said.