Far from being an attractive prize in the race to acquire it, ATEbank had assets estimated at minus 3 billion euros, while its capital adequacy index stood at -20 percent before the lender was split into a sound part and a bad part, with Piraeus Bank netting the former of the two.
This dramatic picture was the result of a bond exchange (PSI) in March and problems amassed from decades of mismanagement.
ATEbank has long been a hotbed of scandal: In 1999, on the orders of the government at the time, it spent billions to support the Athens bourse. It has been known to expedite the approval of loans for share-buying and was involved in the scandal of structured bonds. It has made investments in risky derivative products, approved loans without guarantees to businesspeople considered bankrupt by the market and granted loans to questionable farming cooperatives. This kind of mismanagement went on for decades, with the participation of the country?s main political parties.
Money-squandering was another part of ATEbank?s problems and as far as its subsidiaries are concerned, this occurred on a grand scale. In fact, out of the funds that the lender spent for the creation and support of those companies, some 82 percent fell through the cracks, while 5 billion euros spent by the state for the bank?s recapitalization from 1997 to 2011 is also gone. In 2011 alone the state boosted ATEbank with fresh funds of 1.55 billion euros.
In the 2002-2010 period the bank showed losses of 300 million euros, but if we add the first nine months of 2011 — that include just a small part of the PSI — losses soar to 1.3 billion. Even in the golden age of the credit system the bank had shown relatively small profits, while in the 2005-2010 period most of the profits, or 10 billion euros, were used to deal with bad loans.
From the 5,671 people the group employed in 2001, the number rose to above 10,000 in 2010, while today it has dropped to 9,300 after streamlining. Sources say that 10 percent of the staff are cleaners.
In a stress test conducted in 2011, ATEbank finished last among the 90 or so European banks that participated. For its capital adequacy index to make the lowest acceptable level of 8 percent, the state would have to recapitalize with 4 billion euros.
The problem had to be resolved by yesterday, the last day of July, otherwise the bank would have been deemed unsustainable and would have had to immediately return the 6.3 billion euros it had received from the Eurosystem. Advised by an independent consultant (Bain), the Bank of Greece decided to split ATEbank in two parts and followed the legislative framework provided. Piraeus and Eurobank EFG submitted offers, but only Piraeus guaranteed all jobs at the ailing lender.