Greece will make it a priority to recapitalize the nation's banks by the end of this year, probably using a bail-out fund to plug capital shortfalls, a Greek central bank official told media.
"Our number one priority is to avoid a bail-in on Greek banks. If the recapitalization occurs by the end of this year - this way we will avoid a bail-in," the official said on condition of anonymity. Greek banks may need as much as 25 billion euros to recapitalize, a shortfall exacerbated by an outflow of deposits. The flood of money leaving the country culminated in authorities imposing capital controls on June 29 to prevent a financial meltdown.
"We want all processes, of the stress tests, the asset quality review and the recapitalization to have been concluded by the end of the year," the official said.
"It is most likely that the recapitalization will occur like the last one, through a bank bailout fund," he said, referring to a previous cash injection Greek banks received through the Hellenic Financial Stability Fund.
In January 2016, an EU directive comes into effect setting resolution processes for banks. They can include, after all other recapitalization options have failed, asking bank clients to forfeit deposits - a bail-in.
Such a process was first tested in the euro zone in Cyprus, where depositors saw 47.5 percent of their cash exceeding 100,000 euros converted into equity to recapitalize lender Bank of Cyprus.
That bail-in was contingent to Cyprus receiving an international bailout in 2013 when international lenders refused to stump up recapitalization cash for banks amid concerns the island's debt would become unsustainable.