Banking Sector Gets Set For Substantial Changes

(Photo credit: Wikipedia)

The Greek banking sector is poised for substantial changes following Sunday night's decision to postpone a merger plan between National Bank (NBG) and Eurobank and to proceed with separate recapitalizations, abandoning the aim of recapitalizing a unified group after completion of a legal merger in June. The four systemic banks in Greece are now going to proceed with separate recapitalizations (Alpha Bank and Piraeus Bank have already started relative procedures and have called for general shareholders' meetings to approve share capital increase plans).

In a statement issued late on Sunday night, the central Bank of Greece (BoG) said that a recapitalization process for all four systemic banks (National Bank, Alpha Bank, Eurobank and Piraeus Bank) will proceed as scheduled with the aim to be completed before the end of April.

The statement added that the Hellenic Financial Stability Fund (HFSF)will fully cover its part in the share capital increase schemes and has already paid in advance the necessary capital, part of the 50 billion euros approved and earmarked in the framework of a financial aid programme agreed for the recapitalization of the Greek banking sector. The stability of the Greek banking system is therefore secured, as are all bank deposits, the central bank noted.

Shortly after the statement released by the Bank of Greece (in agreement with the troika), National Bank's and Eurobank's managements notified the central bank that they were unable to raise the 10 pct of private capital needed for their recapitalization. As a result, the Financial Stability Fund will begin procedures to take over control of the two banks and proceed with their recapitalization.

The Fund, as the main shareholder of the two banks, will decide whether the merger plan will proceed at a later stage, or whether the two banks will be sold. A Finance ministry official said that merger procedures were temporarily postponed and the Fund will have a final decision over the future of the merger plan. Responding to reporters' questions over whether the Fund would be able to decide on the sale of the two banks separately, the official said that the Fund can reach any decision it wanted, based on its criteria.

Meanwhile, Alpha Bank and Piraeus Bank are expected to hold extraordinary general shareholders' meetings to approve their share capital increase plans. The two banks' managements expressed their full optimism that they would maintain their private status by covering a 10 pct private participation needed in the share capital increase plan. (AMNA)