Banks raise hands for rescue plan

Greek banks are expected to take part in the 28-billion-euro rescue plan offered by the government to help shield the lending system from the global financial and credit crisis. Finance Ministry and Bank of Greece officials said that the extent of each bank’s participation will depend on their respective market share. Banking sources had indicated last week that many Greek lenders would not participate in the bailout package, arguing that they are in good heath capital-wise. Under the plan, the state can guarantee capital market loans and may buy preferred shares in banks, while setting a ceiling on bank executives’ salaries. The plan includes the Greek government putting up as much as 15 billion euros to back new bank loans or refinance existing ones and earmarking as much as 5 billion euros to buy preferred shares in the banks that need to raise the level of their capital. The government also plans to deposit 8 billion euros’ worth of bonds with the banks. Bank of Greece Governor Giorgos Provopoulos told a parliamentary economic committee on Tuesday that the 28 billion euros «is there to provide the liquidity that banks cannot find through normal channels.» «I believe in the end all (banks) will make use of the plan. Inevitably they will come to this fountain,» he said. However, three banks belonging to buyout firm Marfin Investment Group said they would not participate in the plan, worth up to 11.4 percent of Greece’s gross domestic product. «Marfin Popular Bank, Marfin Egnatia Bank and Investment Bank of Greece do not need and do not intend to use any state aid of any nature whatsoever,» they said in a statement. Although local lenders have had little exposure to so-called toxic assets, they cannot escape the conditions of tight liquidity that prevail in money markets due to frozen interbank lending markets. Senior industry sources said that some banks may make use of the bailout plan as a means of boosting profit margins rather than using it to solve liquidity problems.

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