Greek bank cost savings may help rescue fund buffer

Efforts by Greece’s top four lenders to cut costs and sell non-core activities may generate capital equivalent to a 5-billion-euro boost in the Hellenic Financial Stability Fund’s (HFSF) current buffer, the country’s central bank chief said on Friday.

The more capital National, Piraeus, Eurobank and Alpha generate through restructuring to boost their equity, the lower their potential need to tap the HFSF rescue vehicle for extra funds.

The fund, financed by Greece’s bailout by the European Union and International Monetary Fund, covered 25 billion euros out of last year’s recapitalization in return for shares in the four banks, becoming their majority owner.

It has a cushion of 8 to 9 billion euros.

“The efficient use of the backstop during recapitalization and resolution has left a buffer of around 8-9 billion [euros at the HFSF], should additional capital needs arise,” Bank of Greece Governor Giorgos Provopoulos (photo) said in a speech to a monetary and financial institutions forum in London.

“The sale of non-core assets and the exploitation of synergies arising from mergers could add some 5 billion euros to the [HFSF] buffer,” he said.

Provopoulos, also a European Central Bank Governing Council member, said structural and fiscal reforms in Greece and the euro area were working, but the situation in the debt-laden country remained fragile, partly due to political uncertainty.