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live Eurobank’s employees renounce salaries to avoid nationalization

09 April 2013 / 14:04:09  GRReporter
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Eurobank has requested its employees and management team to renounce salaries for two months in order to take part in the recapitalization of the bank. After the failure of the deal between the National Bank of Greece (NBG) and Eurobank, the two financial institutions are to be recapitalized separately. According to the latest information, Eurobank needs 5.8 billion euro to keep afloat and not go bankrupt. The Greek Financial Stability Fund insists that the state has funds to recapitalize the four system banks. However, if the Fund fully fills the holes in the NBG and Eurobank, they will become state property.
Eurobank, therefore, is trying to avoid full nationalization. It is seeking to raise from private investors 10% of the required capital in order for the bank control to remain independent from the state. The management of the institution is planning to launch convertible bonds worth one billion euro. At the same time, it wants to raise capital of 480 million euro from private investors and to obtain the rest of the amount from the rescue fund as reported by Kathimerini. The bank’s management encourages its employees to invest one or two salaries to be able to take part in the capital increase and to help avoid nationalization.

The National Bank of Greece (NBG), in turn, needs 9.8 billion euro. "If we fail to collect the minimum amount required for the involvement of private investors, the Greek Financial Stability Fund will cover the full cost of the recapitalization of the bank," reads an official statement of the NBG. The recapitalization of the banking system itself should be completed by the end of April this year. Financial analysts comment that if the major financial institutions have not found new investors by then, it will be difficult for them to find them over the following two weeks.

Although the merger has failed, the NBG continues to hold an 85% stake in Eurobank. The majority of financiers consider almost certain that the NBG will not be able to cover the recapitalization of the acquired bank. If the full weight of the refinancing falls on the Greek Financial Stability Fund, as expected, it will become a major shareholder in both institutions. Then, the Fund and the state will have to decide whether the banks should merge, or if they should be sold or divided into parts.

Now, the boards of both banks are discussing how to develop the recapitalization process. While the management is trying to find a way out of the difficulty, small shareholders in the two big banks have submitted a series of complaints, because they had not been informed in advance about the failure of the merger deal. The NBG and Eurobank’s managements notified the Bank of Greece first and then, the news broke in the public domain. As a result, the prices of the two institutions’ shares traded on the Athens Stock Exchange plunged by 30% on Monday.

Tags: EconomyCompaniesNBGEurobankRecapitalizationCrisisGreeceBank collpase
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