Part of HFSF reserves set aside

The Bank of Greece has decided to maintain a precautionary capital reserve of 2 billion euros from the unused resources set aside for the recapitalization of the Greek credit system at the Hellenic Financial Stability Fund (HFSF).

BoG, together with the HFSF administration, decided to put this amount aside so that the HFSF could retain the capacity to support the credit sector if this becomes necessary. Therefore, out of the 11.3 billion euros that the HFSF currently has as unused capital stock, only 9.3 billion euros will be released to be used for other purposes, such as reducing the state debt.

From the original package of 50 billion euros loaned to Greece for the support of its banking system, less than 40 billion euros was eventually used: The HFSF gave about 25 billion euros for the recapitalization of the four systemic banks, while another 13.4 billion euros was invested in the restructuring of problematic lenders. The fund spent 7.5 billion euros to cover a funding gap from the split of ATEbank, 3.7 billion euros for Hellenic Postbank, 350 million euros for First Business Bank and 320 million euros for the three cooperative banks in resolution (Achaiki, Lamias and Limnou-Lesvou).

A large chunk of the 40 billion euros the HFSF (and therefore taxpayers) has given away will be lost as the recapitalization served partly to cover the huge losses banks incurred from the debt restructuring (PSI).

Today the current value of the HFSF holdings in the four systemic banks amounts to some 15 billion euros, while a few months ago, before the specter of political risk appeared in the country, the value of the fund’s holdings in National, Piraeus, Alpha and Eurobank had amounted to almost 20 billion euros.

If conditions revert to normal and the country’s return to the road of recovery is confirmed, then the HFSF could retrieve most of the 25 billion euros it placed in the four major lenders. If the 2 billion euros set aside is not used, it will be added to the collections from the holdings in the systemic lenders, while another 3 billion euros will come from the liquidation of problematic lenders.