EU Aims to Lure Greek Deposits Back to Banks With Bail-in Shield
Euro-area finance ministers shielded Greek bank depositors from any losses resulting from the restructuring of the nation’s financial system, as part of Friday’s deal on an 86 billion-euro ($96 billion) bailout.
Senior bank bondholders will be in the crosshairs if Greek lenders tap into any of the financial stability funds set aside in the new bailout. Euro-area finance ministers agreed to a deal that would next week place 10 billion euros in Greece’s bank recapitalization fund, with another 15 billion euros available if needed.
“Bail-in of depositors will be explicitly excluded” from European Union rules to make private investors share the cost of fixing troubled banks, Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem told reporters after the six-hour meeting in Brussels.
“When so much money must be invested in banks, in the first place, banks must take part of the risks,” Dijsselbloem said.
Alpha Bank AE’s 400 million euros of 3.375 percent notes due 2017 traded at 70.5 cents on the euro Friday to yield 25.4 percent. Those securities are up from a low this year of 27.5 cents in July.
Firewall Fund
At the start of the new aid program, the bank funds will be placed in a designated account at the European Stability Mechanism, the currency bloc’s firewall fund. Bank supervisors can tap the money as required once Greece’s banks have gone through stress tests and an asset-quality review.
After Greece’s lenders are recapitalized, the subsequent bank holdings will be transferred to the nation’s planned privatization fund, which will then be able to sell off the stakes and use the proceeds to pay back bailout funds.
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