Leading Greek banks in the doldrums and need over $17bn to recapitalize
Greece’s second largest bank by assets, Eurobank, needs €5.8bn, with the fourth largest lender Piraeus Bank being short of €7.3bn, according to the Wall Street Journal. In the first 9 months of the year the two banks reported combined losses of €1.7bn, with a huge part of that due the banks’ participation in the country’s debt restructuring programme.
The four biggest banks in Greece were left technically insolvent, after they joined the €200bn debt restructuring programme. It left them dependent on extremely expensive loans from euro zone member states and the International Monetary Fund.
In the framework of Greece’s second bailout package the country reserved about €50bn to recapitalize its troubled banks. €18bn of that was provided to lenders in May through bonds issued by the European Financial Stability Facility (EFSF) – Europe's temporary bailout fund.
Bridge financing will be another way to support Greek banks until they complete a formal recapitalization early next year. The Greek bank rescue fund will act as an underwriter as the lenders boost capital and are set to take up about 90% of the new stock issued. This would practically mean nationalization of Greece’s banking system.
Bridge financing is a way of financing, aimed at maintaining liquidity while waiting for an anticipated and reasonably expected inflow of cash.
There have also been bank mergers in Greece to make them more efficient and attractive to potential investors. Among the most recent cases are Eurobank that’s set to team up with National Bank of Greece.Alpha Bank SA also said it would acquire the Greek unit of French lenders Crédit Agricole, with Piraeus Bank saying it’ll acquire the local unit of Société Générale. Piraeus has also acquired the healthy assets of state-owned farm lender ATE Bank.