Bank recap leftovers will be used to plug other holes

The government will use what remains from the 50-billion-euro package destined for the recapitalization and restructuring of the country’s credit sector to plug any holes created by the shortfall in privatization revenues or bailout cash running out.

The new stress tests on banks will take place in September and will determine the amount that will remain from the recapitalization, which the Bank of Greece estimates at over 13 billion euros.

There was originally a provision for a stock of 5 billion euros, while another 3 billion has been collected from the participation of private investors in the banks’ share capital increases. That may increase further if non-systemic banks are also recapitalized successfully. Another 2.5 billion euros will be saved from synergies thanks to mergers in the sector. Finally, an additional 3 billion euros will come from the sale of non-banking operations and subsidiaries, as provided for in the banks’ business plans.

That reserve, or part of it if the stress tests reveal additional requirements for banks, will be used to cover funding gaps such as that already forecast for 2014, amounting to 4.6 billion euros.

Finance Minister Yannis Stournaras stated in a document forwarded to Parliament that there is no reason for the triggering of the automatic correction mechanism due to the departure of the Russians from the privatization process for the Public Gas Corporation (DEPA): “Any delays in the execution of the privatizations program are covered by the faster execution of other structural reforms such as the recapitalization of credit institutions,” said Stournaras. “It is only after an agreement of the Greek side with the representatives of our creditors that the automatic correction mechanism is triggered.”

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