Rough bargain to tidy up bank losses

As co-sponsors of the state, in order to regulate the restructuring of the debt, the Greek bankers, the Greek Government, BNP-Paribas, Deutsche Bank and HSBC had feverish day-long consultations in a series of meetings yesterday, Thursday.

A meeting between the IIF team, the head of the PDMA, Petros Christodoulou, and the three foreign co-sponsors took place early yesterday morning.

A second meeting followed in the afternoon with the participation of representatives of Greek banks that have been included in the debt regulation while prior to that, a new meeting took place between the PM and the administration of the National Bank.

The round of meetings ended with that of finance minister Evangelos Venizelos with the director of the Bank of Greece, Giorgos Provopoulos, and the heads of the four major Greek banks.

The common topic of all of the negotiations was the finalization of the technical details on how to exchange the bonds held by Greek banks, the losses they will record due to their participation in the program and the accounting way to present these losses.

All of the above will also form the amount of new capital that will be required from banks in order to maintain capital adequacy ratios.

A government agent said late last night that the consultations will continue, believing that the conditions to initiate the exchange of bonds will be determined as soon as possible. He does not rule out the finalization of the terms by Monday, as banks will have to include the losses they will suffer in their six-month results, which will have to be announced by the end of August.

As abeyances remain open, the distress among bank managers will be prolonged, as they currently do not know if their needs will be small enough to be covered by increases in equity or whether they might have to go for other painful solutions, with the worst of them being the Financial Stability Fund, which is equivalent to the nationalization of the banking system and the radical reordering of the bank map.

According to one scenario, which is the key factor in the trading of Greek banks and the mildest one so far, new funds worth 2,6 billion euros will be required for all banks. The extreme scenario provides that banks should strengthen their balance sheets with fresh capital amounting to 9 billion, a figure too high to be sustained by the existing shareholders.

It should be noted that until the end of September, banks might need more capital to cover the insecurities of their loans that will be considered as non-coverable by their estimations.