After the decisions taken at the last summit in Brussels, Greek banks started a hot battle in search of their "trimmed" capital. Over the next eight months the banks have to make up for funds in the amount of 22 billion euro (this includes also the requirements after the inspection of ΒlackRock), and the sale of their property in the Balkan countries seems like the only possible solution so as to avoid the possibility of nationalization.
The issue of recapitalization of Greek banks seems to be most important one in the decision to cut government bonds by 50%, while it is at the same time a fundamental policy choice of the government. This is true because the fate of private banks, whose "sin" lies in the fact that they supported the Greek economy by purchasing government securities, will depend on how fast these funds will be raised. On this, however, will also depend the future of the market and of the economy as a whole. The question now is when will the credit lines to households and businesses be restored.
Senior banking market factors indicate that it is too early to assess the losses from recent decisions taken at the summit, many details are still to be clarified but they acknowledge that "now the struggle affects all." They mean the struggle that starts immediately with the calculation of the losses and its peak will be in June 2012, when either each bank would have raised the billions of euros needed, essential, or it will seek assistance from the Fund for financial and credit stability and it will forcibly end up under the control of the state.
In the document containing the conclusions of the summit it is clearly noted that eurozone commits to the recapitalization of Greek banks. As stated, the Europeans will provide credit enhancement, for the securities of Greek banks to be guaranteed and obtain liquidity from the European Central Bank.
Banks will have to seek capital from private sources, and subsequently from national governments. In the event that these two sources prove unable to stabilize them the European Financial Stability Fund (EFSF) will provide the necessary capital.
Thus, the efforts of Greek banks should focus first on the search of funds from their shareholders through a capital increase as well as through the use of their long term assets, mainly from the sale of their subsidiary branches in Southeast Europe, where over the past two decades Greek banks played a key role and for many of them this was a source of huge profits.
Losses
Difficulties that banks will have to overcome are different for each one of them, because they depend on the bonds they own, but also on the choices banks have. So, without the necessary capital being calculated after the inspection of the U.S. company BlackRock, National Bank of Greece may need nearly 3.5 billion euro. An amount which may be covered by the sale of Finasbank. Many believe, however, that if the Turkish Bank is sold, the National Bank of Greece will lose its only source of profit, which it may have over the coming years.
The new AlphaEurobank will need about 2.7 billion euro, and the new shareholder, the investment fund of Qatar, will be urged to take most of the burden. The first task of the new management is to complete the legal side of the merger of the two banks, and then shareholders will seek additional capital by increasing the share capital and the issuance of bonds, as announced earlier.
"Piraeus" bank will need around 1.9 billion euro. Its largest shareholders will need to considerably strengthen their positions in cash and the bank and will proceed to the sale of property.
The Agricultural Bank will need 1.8 billion euro, the Savings Bank - 1.5 billion euro, Bank of Cyprus - 500 million euro and the bank "Marfin" - 600 million euro in new capital. The total loss for the seven banks amounts to 12 billion euro. Together with the initial procedure for the replacement of Greek bonds (PSI) with the 21% cut it in July, the amount reaches 18 billion euro. By June 2012, however, banks have to find 12 billion euro, as capital from the previous cut were included as losses in the results for the first six months.
This practically means that the new net loss of the Greek banks amounts to approximately 12 billion euro, although the exact amount will depend on the bonds, which will be included.
In any case, Greek banks could cover losses either with the help of their shareholders or through the sale of property if the problems with BlackRock, which forced them to find additional capital did not exist.
According to the European banking regulator (EBA), Greek banks will need additional capital in the amount of 30 billion euro which are covered by this bailout, and for the overall recapitalization, European banks will need 106 billion euro.
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