ATHENS

The Pak Banker - - FRONT PAGE -

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.

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