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Struggle for the National Bank of Greece

10 April 2013 / 16:04:44  GRReporter
2634 reads

Victoria Mindova

The National Bank of Greece (NBG) will be able to collect from private investors the capital required and it will remain Greek property if existing shareholders are allowed to participate in the recapitalization. This is the firm view of George Giannakopoulos, chairman of the union of employees of the National Bank of Greece.

The NBG needs about 9.8 billion euro for the recapitalization to continue to function. If the financial institution is able to raise from private investors about one billion euro alone or to increase the share capital, it will remain private. The rest of the capital will come from already allocated funds from the financial aid to Greece under the second bailout agreement. If the bank fails to raise 10% of the recapitalization value from private investors, it will become public property and its major shareholder will be the Greek Financial Stability Fund. It will provide the full support amount and will take control over the NBG.

In the middle of this week, the bank employees responded very sharply to the notice of the board that the financial institution would be unable to collect from private investors 10% of the amount required for the recapitalization and that it intended to seek help from the Greek Financial Stability Fund. This action will immediately turn the NBG from a private bank into a public one and the existing shareholders will lose their shares in it.

"They tried to exclude the existing shareholders from the process. This has driven us to respond immediately," said Giannakopoulos. "There are 250,000 shareholders, including organizations, businessmen, households, social security funds and even the Church," he says in a telephone conversation with GRReporter. The bank employee explains that the initial decision of the management not to increase the share capital but to directly use the funds granted by the Hellenic Financial Stability Fund has scandalized the shareholders.

"They cannot deprive the shareholders of the right to try to save the bank from nationalization. Transferring the NGB into the hands of the Fund without trying to increase the share capital with the help of the existing shareholders is betrayal," insists Giannakopoulos. He believes that the attempts to quickly complete the recapitalization with the support funds from Europe and the International Monetary Fund are contrary to the interests of Greece. "Shareholders should be free to decide whether they will participate in the increase of the share capital or not."

Public pension and health funds hold about 14% of the share capital of the NBG. The church holds a 1.6% stake in the institution. Private insurance companies in the country hold another 5%. The union states that the recapitalization programme excludes the involvement of the social security funds in the increase of the share capital, which reduces the options to raise additional funds. Giannakopoulos states that the government has been pursuing an unduly selective policy on how to treat social funds during the reform processes in the country.

During the reduction of the public debt, the public social funds were treated as private organizations. The nominal value of the government bonds as part of the external debt of the country, which was recorded in their balance sheets, were cut by 53% within the PSI (Private Sector Involvement). Now, the government is considering them public investors, not allowing them to participate in the free raising of private capital.

The government was quick to release a statement, stressing that social funds were independent organizations and that they were free to decide whether to take part in the recapitalization of the bank or not. "As a government we cannot make any insurance fund take any action or otherwise. This means that they can make these decisions based on their financial availability and only if they are in favour of the fund and the people insured in it."

George Giannakopoulos finds the position of the government evasive, insisting that the interest of the country and of those insured in the public social funds in particular is retaining the leading position of the NBG among the private commercial banks in the country. This will not happen if the Greek Financial Stability Fund takes over the bank. Employees fear that the Fund will divide the financial institution into parts and will sell it by the piece to external investors, which will be the end of the NBG.

"For decades, the National Bank of Greece has been a tool to stimulate economic growth and to support real business in the country. The current plan will destroy the bank, it will devalue its assets and nullify the investments of its existing shareholders," insists Giannakopoulos. He calls all Greeks, who are able, to participate in the recapitalization of the bank. The employees insist that raising one billion euro from private investors will ensure the stability of the financial institution and prevent it from being sold.

While the bank employees are protesting, the boards of the NBG and Eurobank have sent a notification letter to the Bank of Greece. It informs that the two banks will probably not be able to collect the required private capital of 10%, which bank employees interpret as a loss without a fight by the management. By the end of the month, the boards of the NBG and Eurobank will have to decide on the form of the recapitalization. They will determine the participation of the existing shareholders in the capital increase and the number of new shares and newly issued convertible bonds (Cocos). Meanwhile, the head of the Bank of Greece George Provopoulos has stressed before the National Assembly that the financial aid has provided 50 billion euro for the bank recapitalization and that the deposits in the country are absolutely guaranteed.

Tags: EconomyCompaniesNBGEurobankRecapitalizationCrisisGreeceBank collpase
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