Bloomberg News

Greece Activates Bank Rescue Fund to Create New Proton Bank

October 10, 2011

(Adds share suspension in fifth paragraph, Greek banks in sixth.)

Oct. 10 (Bloomberg) -- Greece’s central bank activated a rescue fund set up under an EU-led bailout in May 2010 to restructure Proton Bank SA, with the Hellenic Financial Stability Fund becoming its sole shareholder.

Athens-based Proton will reorganize into a new lender called New Proton Bank which will have a 10.6 percent capital adequacy ratio, according to an e-mailed statement from the Greek Finance Ministry today. A separate Bank of Greece statement said the capital adequacy was well above regulatory thresholds.

“The Financial Stability Fund provided the necessary capital for the ‘good bank’ and became its sole shareholder,” the central bank said. “The deposits of all customers are secured and the smooth continuation of business is guaranteed through the new bank.”

It was the first rescue under the Greek fund, which received 10 billion euros ($13.5 billion) as part of the 110 billion-euro EU-led bailout, designed to provide capital and ensure the stability of the banking system. Proton Bank, with assets of 3.5 billion euros, has been buffeted by the debt crisis, combined with an investigation into possible money laundering.

Shares in Proton Bank were suspended from trading from today on the Athens bourse, after a request from the securities regulator. The stock has fallen 74 percent so far this year for a market value of 11.3 million euros.

Shares in Piraeus Bank SA, the nation’s fourth-biggest, fell as much as 28 percent in early trading on the Athens exchange and traded 20 percent lower at 2:50 p.m. in Athens at 30 cents. National Bank of Greece SA, the largest, lost 13 percent to 1.89 euros. Alpha Bank SA fell 13 percent to 1.02 euros, while EFG Eurobank Ergasias, the number two, lost 14 percent to 70 cents.

The declines are “a result of speculation that exists and existed of a 50 percent haircut,” said Dimitris Giannoulis, an analyst at Deutsche Bank AG in Athens. Comments by French President Nicolas Sarkozy and German Chancellor Angela Merkel of a “durable” fix for Europe’s banking crisis that may require banks to accept larger-than-expected writedowns on Greek government bonds has sparked more speculation, he said.

“The haircut may not happen, but there is more speculation as a result of the fact they said they are waiting for the troika review to see the debt sustainability,” he said. “The market considers this signals a haircut of around 50 percent.”

The old Proton bank, which had its license revoked, has been placed into liquidation with the proceeds to be used to cover the claims of third parties, according to the central bank. The shareholders will rank last as claimants.

--With assistance from Natalie Weeks and Marcus Bensasson in Athens. Editors: Chris Peterson, Alan Purkiss

To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net


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