Greece will make recapitalising banks this year a priority - central bank official (updated)

Euronext Athens Holding SA

31/07/2015 19:14

(Adds detail) 
    ATHENS, July 31 (Reuters) - Greece will make it a priority 
to recapitalise the nation's banks by the end of this year, 
probably using a bail-out fund to plug capital shortfalls, a 
Greek central bank official told Reuters on Friday. 
    "Our number one priority is to avoid a bail-in on Greek 
banks. If the recapitalisation occurs by the end of this year - 
this way we will avoid a bail-in," the official said on 
condition of anonymity. 
    Greek banks may need as much as 25 billion euros to 
recapitalise, a shortfall exacerbated by an outflow of deposits. 
The flood of money leaving the country culminated in authorities 
imposing capital controls on June 29 to prevent a financial 
meltdown. 
    "We want all processes, of the stress tests, the asset 
quality review and the recapitalisation to have been concluded 
by the end of the year," the official said.   
    "It is most likely that the recapitalisation will occur like 
the last one, through a bank bailout fund," he said, referring 
to a previous cash injection Greek banks received through the 
Hellenic Financial Stability Fund.   
    In January 2016, an EU directive comes into effect setting 
resolution processes for banks. They can include, after all 
other recapitalisation options have failed, asking bank clients  
to forfeit deposits - a bail-in. 
    Such a process was first tested in the euro zone in Cyprus, 
where depositors saw 47.5 percent of their cash exceeding 
100,000 euros converted into equity to recapitalise lender Bank 
of Cyprus  BOC.CY .  
    That bail-in was contingent to Cyprus receiving an 
international bailout in 2013 when international lenders refused 
to stump up recapitalisation cash for banks amid concerns the 
island's debt would become unsustainable.  
 
 (Reporting By Lefteris Papadimas, writing by Michele Kambas, 
editing by Larry King) 
 ((lefteris.papadimas@thomsonreuters.com;)) 
 
Keywords: EUROZONE GREECE/BANKS