Bloomberg News

EU Opens In-Depth Probes Into Greek Banks’ Recapitalizations

July 27, 2012

Alpha Bank SA, EFG Eurobank Ergasias SA (EUROB), Piraeus Bank SA (TPEIR), National Bank of Greece SA, Greece’s four biggest banks, and Nea Proton Bank (PRO) won temporary European Union approval for recapitalizations from Greece’s banking bailout funds pending in-depth reviews.

The EU’s executive arm approved for six months the 18 billion-euro ($22 billion) bridge recapitalization for Greece’s four biggest banks carried out in May, or until its conversion into a final recapitalization, according to an e-mailed statement from the Brussels-based European Commission.

EU regulators opened in-depth investigations into the banks, which need recapitalizing after sustaining losses on their holdings of Greek government bonds in the country’s debt swap, the biggest sovereign restructuring in history. The country obtained a 130 billion-euro bailout from the European Union and International Monetary Fund in March, which earmarked 50 billion euros for the recapitalizations.

“Greek banks are currently operating under extreme conditions,” EU Competition Commissioner Joaquin Almunia said in the statement. “The bridge recapitalization by the HFSF ensures the stability of the Greek banking system,” he said, referring to the Hellenic Financial Stability Fund.

The European Central Bank temporarily suspended Greek banks from its funding operations on May 16 until they received the bridge funds later that month. The banks have to raise their core tier one capital ratios to 9 percent by the end of September and 10 percent by the end of June 2013.

The Commission also temporarily approved a separate 1.7 billion-euro capital package for Nea Proton, formed with assets from Proton Bank SA’s liquidation last year, while saying it had doubts over the restructuring plan. The plan may not restore the long-term viability of the new lender without state support and may not be the least costly solution, it said.

The EU’s antitrust agency must scrutinize large payments to banks and may set limits on the aid or order some of the money to be repaid to the government.

To contact the reporters on this story: Aoife White in Brussels at awhite62@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net; Craig Stirling at cstirling1@bloomberg.net


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