Greece is close to completing a deal for a Greek takeover of the local units of Cypriot banks, after at least two of the country's biggest lenders showed interest – Alpha Bank and Piraeus Bank.
Greece has been rushing to wrap up the deal in a bid to protect its battered banking system from the fallout from a plan to impose a levy on bank deposits in Cyprus, but its efforts have been held up by delays in Nicosia in approving the tax.
Euro zone finance ministers excluded the Greek branches of Cypriot banks from the controversial tax included in the island's international bailout on condition that those units would be transferred to Greek banks.
"The Greek government is ready to conclude the transfer of Cypriot bank operations in the country to Greek banks in a few hours," a senior government official said on Tuesday. "But we have to wait for the parliament in Cyprus to vote."
The official said there was also a “plan B”, without providing details.
Such a plan could involve Hellenic Postbank, a small lender controlled by the country's bank bailout fund Hellenic Financial Stability Fund, if interest by other lenders is deemed unsatisfactory, bankers have said.
The three Cypriot banks with operations in Greece - Bank of Cyprus, Cyprus Popular Bank (CPB) and Hellenic Bank - have about a 10% share of the banking market based on loans and about 8% of deposits.
They operate as branches of their Cypriot parents and not as subsidiaries, meaning they are regulated by the Central Bank of Cyprus, which also provides them with funding through its emergency liquidity assistance (ELA) facility.
Their ELA exposure stems primarily from their Greek operations and covers their funding gap - the difference between assets and liabilities. The Greek units have higher loan-to-deposit ratios compared to their Cypriot parents.
Together they run a network of just over 300 branches in Greece and employ about 5,000 people. Their combined loan portfolio tops 20 bln euros, according to analysts.
The biggest of the three is Bank of Cyprus, which has a network of 181 branches.
The branches of the three Cypriot banks remain closed on Tuesday and Wednesday, in line with the extended bank holiday in Cyprus. Shares of Bank of Cyprus and CPB, which are also listed in Athens, did not trade.
Athens has rushed to reassure savers in Greece they will not be affected by the Cypriot levy and that the country's banking system is stable and there was little indication of panic as Greek banks reopened on Tuesday after a three-day weekend.
"We don't have withdrawals because of the Cypriot issue," a senior bank executive said. "It's like any other day - we don't see any differences."
Bankers said there was no rush to withdraw savings on Tuesday although concerns remain that the tax on deposits may reverse a trend of deposit inflows back into the Greek banking system since fears of a Greek euro exit began to fade.
"Overall, the situation is calm," said the treasurer of a Greek bank. "We have had phone calls from clients of Cypriot banks asking us what interest rate we can offer if they move their money to our bank. But I don't see any trend developing of withdrawals from Greek banks."
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