Fund managers eager to see as small a recap as possible

Some of the world’s biggest foreign institutional investors, with significant stakes in the country’s four systemic lenders, have started lobbying for the “rational” recapitalization of the local credit system.

Fund manager names don’t get much bigger than Prem Watsa, Wilbur Ross and John Paulson. They and, according to sources the prime minister of Qatar as well, joined forces after seeing the capital they invested in domestic banks all but evaporate over the last four years. In certain cases their losses have come to as much as 94 percent, which means they are very interested in the level of the upcoming recapitalization.

The mathematics are fairly simple: If the total amount is contained, i.e. at no more than 8 or 9 billion euros, then the prospect of their participation is more optimistic. If it comes to more than 13 or 14 billion euros then the complete nationalization of all four systemic banks will become inevitable. But even then they will have something to fight for: A participation option, on favorable terms, in the reprivatization procedure of all four lenders, once that is set in motion.

Sources close to the foreign funds say they are optimistic because they calculate that a total of more than 25 billion euros was invested in the banks by the old shareholders, including themselves, in two stages. However, the state remained the biggest shareholder, so they now expect that something could be done to protect their interests.

Nevertheless, until that happens, the fund managers have chosen to abstain. This means that the “Greece” project could go astray, as while the funds are losing money on banks, they are also worried about their other Greek ventures, such as in real estate and elsewhere. What will happen if they decide to depart? For certain fund managers this matter is also a personal challenge. This is why their campaign is now in full gear at the European Central Bank and in Brussels. The question is what it can ultimately achieve, something that will not be answered for quite some time, according to people in the know.

“At the moment there is no one who knows the exact number, within or outside Greece,” a source close to the parties involved told Kathimerini, referring to the amount used for the recapitalization. The fact that stress tests launched last month are now unfolding makes it even harder to make any secure forecasts. However, a senior bank official says that a picture should start to emerge by the end of the week.