ATHENS, 31 Oct. Gennady Melnik. The draft law on the recapitalization of Greek banks will be adopted on Saturday evening, and the recapitalization will be completed before the end of the year, has informed journalists a source in the Greek government.
Earlier on 30 October, the Ministry of Finance of Greece has introduced in Parliament a bill on the procedure of recapitalization of banks. The bill was introduced as urgent. It will be discussed and voted on Sunday. Recent recapitalization of Greek banks cost the state 40 billion euros. Now it is assumed that the amount of allocated funds will not exceed 25 billion euros.
“Actions at law, must be completed before January 1, 2016 in order to avoid bail-in (restructuring of the banks at the expense of investors — ed.). Protection of deposits up to 100 thousand euros is fully guaranteed and is provided by the Bank Directive (Bank Recovery and Resolution Directive), which entered into force in all member States from 1 January 2015, and in our country it will be applied from 1 January 2016”, — said the representative of the government.
He recalled that on Saturday will announce the results of the stress test four system banks.
“The financial needs of each Bank will be calculated based on two scenarios: base and adverse. According to available information, the capital requirements for system banks in the baseline scenario are at a level that can be funded through private capital. If the owners are not able to cover the amount required by the Bank for recovery, there are opportunities, by all accounts, to meet the needs of capital and the success of the new recapitalization”, — consider in the government.
“The allocation of 25 billion euros to recapitalize banks provided a new credit agreement between the government and the European partners. Part of this capital that will be needed to meet the needs of the Bank in adverse scenarios, will be converted into ordinary shares with full voting rights,” said the source.
He drew attention to the fact that the previous recapitalizations shares purchased by the government, had limited the right to vote.
One more financial “tool”, which is provided for in the bill will be a bonds type Coco’s (Contingent Convertible Bonds). This is “conventional” convertible bonds with high efficiency (from 8% to 10%) that can be converted into ordinary shares with voting rights. Coco’s provide credit and financial support and reduce the cost to the taxpayers by providing the ability to generate revenues.
“Preferred shares owned by the Greek government, can be converted into ordinary shares with voting rights”, — said the source.
“The purpose of government recapitalization double. It and to attract foreign investment, with the participation of the private sector and the state that they had important contributions to banks, in a possible development, an increase in profits. However, the participation of the state should not be unlimited, and banks need supervision, but not that that prevents people to invest capital,” said the source.
According to him, the bill provides for increased transparency and accountability of both banks and financial stability Fund (FSF). “It should be noted that institutions lenders want to have a strong financial stability facility, to control the bankers (who provide loans, what criteria and so forth), and there is disagreement with the Greek side, the remuneration of officials of the FSF and their immunity. The main argument of the Quartet of creditors — the immune system protects members from CFF class-action lawsuits,” said the source.
The government noted that for the first time will be provided for the periodic reviews of the administration and management of banks “the international Commission on the basis of clear and objective criteria”.
The Greek government also noted that the recapitalization did not solve the issue of “red” (nonperforming) loans, but now in the next few days will be a decision on the law relating to the settlement of debt, for the recapitalization was the last.
The source also reported that the recapitalization of Greek banks will participate and the European Bank for reconstruction and development.