(Updates share prices in Context)
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)
By George Hay
LONDON, April 9 (Reuters Breakingviews) - Cypriot depositors
will be spitting tacks. Greece’s two largest banks, National
Bank of Greece (NBGr.AT) and Eurobank EFGr.AT, need 15.6
billion euros of capital between them. They have been struggling
to attract private funds. But instead of suffering a
Cypriot-style scalping in the form of a proper bail-in, they
will be kept whole. What gives?
There are two convincing reasons for the apparent double
standards. One is that Greek banks can already count on 50
billion euros from their most recent bailout, which can be used
to nationalise them at the end of this month if they can’t raise
privately at least 10 percent of the funds they need. Another is
that euro zone officials have been bending over backwards to
emphasise that Cyprus is a special case, for fear of possible
bank runs in peripheral states.
The mooted NBG/Eurobank merger could have helped by reducing
the capital hole if it had generated significant synergies. But
the Greek authorities are sceptical that these will materialise,
according to a person familiar with the situation. NBG’s
management has already admitted it will struggle to attract
private sector interest. Given the impact the merger would have
had on competition, Greek authorities may prefer to restructure
two smaller banks instead of one big, complex one – especially
if Eurobank can attract private capital on its own.
If the Greek economy doesn’t deteriorate beyond what’s
expected, depositors in any nationalised banks will be fine. But
if it takes a turn for the even worse, the 21 percent loss rate
assumed as part of Greek banks’ capital requirements may prove
The Greek government has a buffer: the 50 billion euro
rescue package included a 5 billion euro facility for any future
bank capital needs. That will be bolstered if Alpha (ACBr.AT)
and Piraeus (BOPr.AT), the other two banks, can find private
investors - their capital requirements would then be reduced by
10 percent each. But beyond that, the euro zone would have to
decide whether it wanted to help Greek banks by providing even
more capital. If it balked at doing so, a Cypriot-style fate for
Greek depositors would start to look somewhat less far-fetched.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- National Bank of Greece and Eurobank are to be
recapitalised separately after plans to merge the two Greek
banks were put on hold, NBG announced on April 8.
- The NBG board will meet on April 9 to discuss a capital
increase. If Greek banks cannot find at least 10 percent of
their capital needs from the private sector, the Hellenic
Financial Stability Fund will fully cover the capital increase.
- The final decision on the merger of NBG and Eurobank will
be made by the HFSF.
- NBG shares fell 10.4 percent to 0.47 euros on April 8.
Eurobank shares rose 20 percent to 0.18 euros. At 0945 GMT on
April 9, NBG shares were trading at 0.43 euros, down 6 percent.
Eurobank shares were at 0.23 euros, up 27.8 percent.
- Reuters: Greek banks NBG and Eurobank face state rescue
- For previous columns by the author, Reuters customers can
click on [HAY/]
(Editing by Pierre Briançon and David Evans)
Keywords: BREAKINGVIEWS GREECE/BANKS
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