Depositors will be shielded from bail-in
Euro-area financeministers shielded Greek bank depositors from any losses resulting from the restructuring of the nation’s financial system, as part of Friday’s deal on an 86-billion-euro bailout. Senior bank bondholders will be in the crosshairs if Greek lenders tap into any of the financial stability funds set aside in the new bailout. Euro-area finance ministers agreed to a deal that will place 10 billion euros in Greece’s bank recapitalization fund this week, with another 15 billion euros available if needed. A “bail-in of depositors will be explicitly excluded” from European Union rules to make private investors share the cost of fixing troubled banks, Eurogroup President Jeroen Dijsselbloem told reporters. By shielding all depositors, the euro area will protect small and medium-sized enterprises which have more than 100,000 euros in their accounts and aren’t covered by government deposit insurance, Dijsselbloem said. This prevents “a blow to the Greek economy” that ministers wanted to avoid, he said. Instead, the focus will turn to bond investors. “When so much money must be invested in banks, in the first place, banks must take part of the risks,” Dijsselbloem said. Alpha Bank’s 400 million euros of 3.375 percent notes due 2017 traded at 70.5 cents on the euro Friday to yield 25.4 percent. Those securities are up from a low this year of 27.5 cents in July. At the start of the new aid program, the bank funds will be placed in a designated account at the European Stability Mechanism. Bank supervisors can tap the money as required once Greece’s banks have gone through stress tests and an asset quality review. After Greece’s lenders are recapitalized, the subsequent bank holdings will be transferred to the nation’s planned privatization fund, which will then be able to sell off the stakes and use the proceeds to pay back bailout
German MPs will be recalled from holiday on Wednesday to vote on the proposed bailout for Greece, the speaker of Germany’s Parliament, or Bundestag (pictured), Norbert Lammert, said on Saturday. Analysts say approval on Wednesday is almost certain, given that the governing coalition has 504 out of 631 seats.