More banks seen following Proton to stability fund
More banks are expected in the first half of 2012 to follow the example of Proton Bank, which was nationalized this week when it entered the Hellenic Financial Stability Fund process, according to fund officials.
Sources suggest that Greek banks can withstand a haircut on Greek bonds of up to 30-35 percent by drawing capital on their own. However if the haircut is bigger, combined with the capital needs to emerge from the checks on their loan portfolios by BlackRock, banks will need to resort to the fund?s 30 billion euros. Bank administrations are fearing that a 50 percent haircut will lead to almost all Greek lenders entering the fund?s process.
Fund officials stress that banks will need to strengthen their capital in the coming months as private funds will soon become even more difficult to secure.
At the moment the fund has 10 billion euros, which according to the updated memorandum Greece has signed with its creditors will increase to 30 billion euros.
Another crucial issue for the stability of the banking system in Greece is the duration of the recession, according to sources from the fund. They suggest that unless the economy?s contraction stops soon, the impact on the quality of the loan portfolios of banks will be considerable, requiring additional funds to offset the losses from bad loans.
They add that if the inspection that BlackRock performs for the Bank of Greece does not reveal any clear signs of stability in the system, the report by the US investment management corporation will include very negative conclusions about the capital requirements of domestic lenders.
The entry of a bank in the Financial Stability Fund does not necessarily signify its nationalization. Once the process begins, the fund proceeds to a radical streamlining aimed at selling the lender to a private investor within two years.
