Greece has funds available to recapitalize National Bank of Greece SA and Eurobank Ergasias SA as needed, a European Union official said today.
If the banks aren’t able to raise enough private capital by the end of this month, as required by Greece’s 130 billion-euro ($170 billion) bailout, the Hellenic Financial Stability Fund will step in, said the official, who declined to be named because the talks between the EU and Greece are ongoing. The fund, financed by rescue money, would then be in position to decide how to restructure the banks and whether to involve junior bondholders and shareholders.
The HFSF is fully funded and able to handle any foreseeable recapitalization needs of the Greek banking system, the official said in an interview. As a result, Greece won’t be forced to shut down lenders and impose losses on senior creditors the way Cyprus was required to as a condition of securing EU aid.
Greece’s central bank has been notified that National Bank and Eurobank may not proceed with their planned merger if they can’t raise enough private capital, a Greek Finance Ministry official said on April 7. Greece also is in talks with the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund about securing the next installment of its aid payments.
The capital needs of the two banks are the same whether the two banks merge or not, and any recapitalization would have an identical effect on Greece’s debt and deficit, the EU official said. The EU also will review the matter to make sure Greece’s actions comply with state aid rules.