Oct. 21 (Bloomberg) -- Greece's biggest banks, including National Bank of Greece SA, agreed to take advantage of 28 billion-euros ($38-billion) of government financing and guarantees to boost liquidity and capital levels.

The country's seven largest banks, which control 90 percent of the market, agreed to participate in the plan, a senior finance ministry official told reporters in Athens late yesterday.

The plan, details of which were announced last week, includes the Greek government putting up as much as 15 billion euros to back new bank loans or refinance existing ones and earmarks as much as 5 billion euros to buy preferred shares in the banks that need to raise their capital levels. The government also plans to deposit 8 billion euros worth of bonds with the banks.

The 28 billion euros will be ``absorbed,'' George Provopoulos, the governor of the Bank of Greece, the country's central bank, said today. ``Everybody is going to join the plan.''

Deposit Guarantees

Greece is the latest country to bolster ailing financial institutions after losses on bad debts surpassed $650 billion globally and credit markets froze. The Greek government has already said it plans to raise deposit guarantees, after countries across Europe took similar measures.

The Greek banking system is resilient and strong, the official said. Still, at the present time, it needs to increase liquidity and capital levels, the official said. He spoke following a meeting between Economy Minister George Alogoskoufis and representatives of National Bank of Greece, EFG Eurobank Ergasias SA, Alpha Bank SA, Piraeus Bank SA, Emporiki Bank of Greece SA, Agriculture Bank of Greece SA and Hellenic Postbank SA.

Provopoulos, who spoke to lawmakers in Athens during testimony today, said the Greek banking system didn't face a solvency problem ``but frozen credit markets cause turbulence that poses a liquidity problem.''

Even National Bank of Greece is a net borrower from the ECB, Provopoulos said.

Marfin Popular Bank Pcl, Cyprus's second-biggest bank, and its units in Greece Marfin Egnatia SA and Investment Bank of Greece separately said in a statement today that they don't plan to use state aid ``of any nature.''

To contact the reporters on this story: Christos Ziotis through the Athens newsroom at cziotis@bloomberg.netMaria Petrakis in Athens at mpetrakis@bloomberg.net

Last Updated: October 21, 2008 11:36 EDT