Commission approves Attica Bank’s bond plan

The European Commission has cleared small Greek lender Attica Bank’s plan to issue government-guaranteed bonds to use as collateral for borrowing from the country’s central bank, it said on Monday.

Attica, which suffered deposit outflows last month after the Bank of Greece asked it to freeze lending and address corporate governance issues, plans to issue 380 million euros of such bonds to boost its access to liquidity.

Its deputy chief executive told Reuters last week the bank wanted to have comfortable collateral for tapping the Greek central bank’s emergency liquidity assistance (ELA) facility.

The Commission said the state guarantee feature of the bonds was in line with EU state aid rules.

“[The] measure is targeted, proportionate and limited in time and scope. These bonds will benefit from a state guarantee issued by the Greek state, in exchange for a fee paid by Attica Bank,” the Commission said.

All Greek lenders have made use of such bonds under a liquidity support scheme enacted in 2008 in the wake of the global credit crisis after the Lehman Brothers collapse.

[Reuters]