The announcement that the National Bank of Greece and Eurobank will stage their recapitalization has effectively frozen plans for them to merge as the government wanted, but which was opposed by the country’s international lenders, the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB).
The process and the timetable of the share capital increases of the two lenders as well as those of Alpha Bank and Piraeus will proceed as planned, the Bank of Greece (BOG) said in a statement, adding that all four systemic banks will have to be recapitalized before the end of April.
Troika officials said they worried that the merger, which would create the country’s biggest lender, would be too large for the government to handle if there were problems, which is what happened on Cyprus, where the banks fell into near-collapse and the country needed a 10 billion euros ($13 billion) bailout.
It now looks as if Eurobank will take over the state-owned Hellenic Postbank. All the banks have already prepared for general meetings that will set in motion their share capital increases, the BOG noted in its statement, stipulating that the increases will be covered by the Hellenic Financial Stability Fund (HFSF.)
“The stability of the Greek banking system is fully secured, just as all deposits are fully secured according to the principles of the Greek bailout program,” the statement concluded. The boards of both National and Eurobank sent letters to the BOG admitting they are unable to cover by private means the 10-percent threshold needed in their share capital increases for them to retain their private status, which means that the HFSF is fully undertaking their recapitalization.
National has acquired 84 percent of Eurobank’s shares, but after the recapitalization by the HFSF its stake will shrink to just 3 percent. A future tie-up between National and Eurobank is not ruled out, the newspaper Kathimerini reported, but this will be up to the HFSF to consider at a later date.
Government spokesman Simos Kedikoglou assured Greeks that their bank deposits were not in danger after it was announced that the merger between National Bank and Eurobank was not going ahead. “Deposits at National and Eurobank are absolutely safe,” said Kedikoglou.
“The two banks could not get the 10 percent share capital increase they needed from private investors and legislation meant that no extension could be given,” he said. The two banks’ share prices fell by the maximum permissible 30 percent on the morning of April 8 while Alpha Bank shares dropped 11 percent and Piraeus Bank by 9 percent.
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