ECB wants recap funds paid by Nov 15

The European Central Bank is seeking to disconnect the issue of the Greek bank recapitalization from that of the bailout program review by the country’s creditors, according to a report in a German magazine.

Weekly business news magazine Wirtschaftswoche reported on Friday that Frankfurt wants the 15 billion euros set aside for the capital strengthening of the Greek lenders to be disbursed faster, to make sure the recap is completed by the end of this year.

The report stated that ECB President Mario Draghi put pressure on eurozone finance ministers during last week’s Eurogroup meeting for the recap funds to be disbursed by November 15, and not after the first review of the program.

Bank sources say the ECB is worried that if the recap is allowed to become dependent on the review there will be a serious risk that the process will not be completed by the end of 2015. The same sources add that the ECB is insisting on having the recap completed by year-end so as not to run the risk of a haircut on deposits, which the law will allow for as of January 1, 2016.

The magazine said that Frankfurt is not insisting on the major reforms set as conditions for the loan of the funds for the banks’ share capital increases, such as the restructuring of the social security system. Instead it appears satisfied with the reforms to the credit system, such as the establishment of a rescue fund for Greek lenders and changes to the banks’ corporate governance strategy. However, the report stressed that several member-states have reacted angrily to that prospect.

Bank officials estimate that if the recap money is disbursed after the first review, it will be very hard to complete the process within the year as there won’t be enough time left. It is impossible, they say, for a serious effort to begin to find investors unless banks issue their financial results and it is certain the stability of the credit system will remain secure in any case.

They also consider the disconnection of the recap fund disbursement issue from that of the bailout program review a positive step as it would accelerate the procedure, adding that if the government gets locked in long negotiations again, creating uncertainty and concerns, it will be unlikely that investors will want to participate in the recap process even if the terms are favorable.