Brussels sets rules on Eurobank

By Vassilis Ziras and Yiannis Papadoyiannis

Brussels has issued strict guidelines to Athens regarding the coverage of Eurobank’s capital needs, given that the country’s other systemic banks will cover their requirements from the private sector.

According to sources, European Competition Commissioner Joaquin Almunia sent the Greek Finance Ministry a letter containing four clear demands, from which it stems that the issue price of the new Eurobank shares will determine whether the lender’s share capital increase will be covered by private funds in its entirety or if a part will be covered by its main stakeholder, the Hellenic Financial Stability Fund (HFSF).

The same sources said the four demands are: that the bank must adopt measures to strengthen its capital base and draw funds from the market; state assistance via the HFSF must be as little as possible; the HFSF should only participate if the investors’ response proves insufficient; and, in case the HFSF does participate, the subordinated debt should be subject to a haircut.

The multi-bill that will include crucial clauses on banks is expected to be tabled in Parliament on Thursday, with the aim of passing it into law next Monday.

Sources say that the bill will clarify how Eurobank’s privatization will be realized, while giving the HFSF greater flexibility to secure the lenders’ return to the private sector.