The Greek banking sector unquestionably needs an infusion of capital, but the level largely depends on the stringency of the capital requirements applied.
An expedient quick fix to comply with the minimum capital requirements could be achieved by a bail-in of existing creditors under the EU Bank Recovery and Resolution Directive (BRRD) of around €5 billion, leaving only €6 billion needed for re-capitalisation. If the ‘Cypriot standard’ is applied, however, the required re-capitalisation would be €15 billion. A ‘generous’ approach, which takes into account the phasing in of the new, more-stringent capital requirements until 2018, would imply a re-capitalisation of €29 billion (or more bailing-in of creditors). The re-capitalisation should be undertaken preferably by the EBRD or the new Greek investment fund, rather than via loans from the ESM to the Greek government.
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