The European Commission said on July 27 that it has temporarily approved state aid for five Greek banks, but would launch in-depth investigations “to assess whether the measure is in line with EU state aid rules.”
Four banks – Alpha Bank, EFG Eurobank, Piraeus Bank and National Bank of Greece – have received a total 18 billion euro from the Hellenic Financial Stability Fund as bridge recapitalisation, specifically in the form of deposits of floating notes with maturities of six and 10 years.
The opening of an in-depth investigation is common for large amounts of state aid granted through atypical instruments, the Commission said.
The state aid was made necessary by the lenders’ mandatory participation in Greek government’s debt restructuring deal, which weakened the banks’ capital. The four banks account for about three quarters of the Greek banking sector and held significant amounts of government bonds.
“Greek banks have participated in the Greek Government bonds exchange, known as private sector involvement (PSI). The debt exchange resulted in very significant losses, depleting the capital base of the banks. The bridge recapitalisations have restored the banks’ capital ratios to a level that allows their functioning on the market and access to euro-system operations,” the Commission said.
Another lender, Nea Proton Bank, received 1.7 billion euro of public support as part of its bankruptcy and restructuring proceedings. “At this stage, the Commission has doubts whether the submitted restructuring plan will restore the viability of Nea Proton in the long term without continued state support, and whether this is the least costly solution,” the EC said.
(Photo: G. Schouten de Jel)