Bank rescue plan positive but not needed

Analysts and bankers welcomed news of Greece’s 28-billion-euro package aimed at shielding the banking system from the effects of international financial turmoil but added that local lenders are unlikely to opt for the plan. The rescue plan will enable banks to turn to the state for guarantees of their loans from the capital market, obtain extra liquidity and get capital injections by selling preferred shares to the government, if they so wish. Proton Research said this will allow lenders to raise capital by issuing medium-term bonds and to cover the expected redemption of current bonds until the end of 2009. «With the capital adequacy ratios of top-tier banks already high, the state’s option to inject capital adds one more safety pillow,» the brokerage said in a note. Under the plan, the government is prepared to boost the capital of Greek banks by up to 5 billion euros by buying preferred shares with voting rights. It also guaranteed up to 15 billion euros in capital market loans and stands ready to issue 8 billion euros of special bonds to be able to inject liquidity into banks. Senior Greek bankers were quoted in the press yesterday as saying that local lenders are in good heath capital-wise and unlikely to take up the conditional offer from the government.

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