Greece's Piraeus Bank struck a deal to raise capital that will prevent the state from taking complete control, while Eurobank Ergasias acknowledged it will become the first domestic bank to fall under state control as it dropped plans to raise capital from investors.
The country’s four big lenders—National Bank of Greece SA, Eurobank Ergasias SA, Alpha Bank and Piraeus Bank SA, which control more than four-fifths of the Greek banking market—need to raise some €27.5 billion after they took big losses on Greece’s €200 billion debt restructuring last year. Eurobank said its board decided that Greece’s bank rescue fund, the Hellenic Financial Stability Fund, will fully cover a €5.8 billion share issue, meaning that the state will take full control of the bank.
As part of Greece’s latest bailout by its eurozone peers and the International Monetary Fund, €50 billion has been set aside to recapitalise the country’s four big banks. Under the terms of the recapitalisation plan, the banks must secure 10 per cent of their capital needs from the private sector to maintain management autonomy and avoid becoming fully state-controlled. Greece’s bank rescue fund will underwrite the balance, but will have only restricted management rights if its share is less than 90 per cent. Piraeus Bank said it will avoid full state control with its deal Monday. Banco Comercial Portugues will unload its Greek unit, Millennium Bank, by selling it for €1 million to Piraeus Bank and will invest €400 million in the Greek lender’s upcoming rights issue.
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