National Bank of Greece announced late on Friday its board’s decision to proceed to a full merger with domestic rival Eurobank Ergasias for the creation of a dominant force in the local market that would be able to survive the challenges of a prolonged recession.

The mega-merger planned is set to create a national champion in the industry with combined assets of at least 177.7 billion euros, approaching the country’s gross domestic product. Its loan portfolio will amount to some 110 billion euros and deposits will add up to 90 billion. It will have a total of 1,845 branches abroad and 952 in Greece.

“With this proposal, National Bank is speeding up the merger trend in the Greek banking system, creating a credit institution that will be sustainable in the long term and able to respond to the challenges Greece is going through,” stated NBG’s chief executive, Alexandros Tourkolias.

In the board meetings held separately at the two banks on Friday it was agreed that the merger process will begin with a share exchange near the current stock prices of the lenders, on a three-to-one ratio, to be followed by an acquisition proposal by National to Eurobank.

A press report in the morning had triggered rumors about a merger deal, forcing the Capital Market Commission to suspend trading in the stocks of the two banks for the rest of the day at the Athens bourse.

After French group Credit Agricole’s decision to pick Alpha Bank as its preferred buyer for the sale of Greek subsidiary Emporiki Bank, announced on Monday, the other two suitors, National and Eurobank, apparently decided to forge an alliance of some sort that is now set to lead not just to a merger between them but could also include the industry’s other prized asset, Hellenic Postbank (TT).

Reports in the Greek media have suggested that NBG and Eurobank have been eyeing TT after failing to land Emporiki, but given that both have small stakes in the state-owned lender, it is near certain that once the two banks merge, they will also buy out TT to create a banking giant that will be healthy enough to require no more than a small amount of extra capital from the recapitalization process.