Greece seeking stronger banks
Greece wants to shore up its banking system against the backwash of the country’s debt crisis and has commissioned a study on how to go about it, reviving speculation that some of its lenders could merge.
While Athens has so far been meeting its fiscal commitments, slashing the deficit at a fast pace, its banks continue to face challenges as the austerity-induced recession deepens and liquidity strains persist.
«The Greek banking system continues to face a challenging environment,» Athens said yesterday in a progress report to EU authorities.
«The government has commissioned an in-depth study on the strategic options.»
These might include mergers, local or cross-border, or capital injections, with the government keen on bigger banks with strong balance sheets and better access to capital markets to tackle the tough road to fiscal health.
With a debt load forecast to reach 149 per cent of gross domestic product by 2013 and the economy likely to slump by around 4pc this year as tax increases and cuts in wages and pensions take a toll, Athens is focused on financial stability.
The government has repeatedly called on banks to explore tie-ups to morph into bigger and stronger entities.
All Greece’s six top lenders apart from ATEbank passed a pan-European stress test last month that showed they could cope with a rapid rise in non-performing loans. Although debt restructuring was not covered directly, the test results eased some investor concerns.
The government’s stance has sparked takeover speculation, helping battered bank shares rally since mid-July when Piraeus Bank picked up the gauntlet and offered 701 million in cash to buy government stakes in ATEbank and Hellenic Postbank.
The government, which has said it will seriously consider the offer, is expected to name the investment banks it picked as advisers for the in-depth study next week, with reports saying they will be Lazard, HSBC and Deutsche Bank.
A top concern is banks’ access to wholesale funding, which remains shut because of sovereign debt worries. This forces them to turn to the European Central Bank to fund their maturing interbank liabilities.
