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Despite wider speculation that cash-strapped banks in Greece may face closure as the European Central Bank tries to a aver a financial meltdown as witnessed in Cyprus in 2013, their subsidiaries on the island have been ‘ringfenced’ by the local central bank, but may change hands, according to reports.
The ECB has warned that its emergency liquidity assistance (ELA) has reached levels that are on the brink of matching collateral, forcing the banks in Greece to impose credit controls and limit daily cash withdrawals at ATMs to 60 euros.
As European leaders prepare to meet for a last-ditch attempt to salvage agreement with Greece on Sunday, some Greek banks, damaged by political and economic havoc, may have to be closed and merged with stronger rivals, according to Reuters.
The news agency quoted a source as saying that Greece’s four big banks – National Bank of Greece, Eurobank, Piraeus and Alpha Bank – could be reduced to just two, a measure that would doubtless encounter fierce resistance in Athens.
But a second source said that although mergers of banks were necessary, this could happen over the longer term, pointing to a “Cyprus model” or recapitalising banks.
With rumours intensifying about a potential takeover of the Cyprus-based subsidiaries of the four banks, Central Bank of Cyprus officials and Finance Minister Haris Georghiades have reiterated that the four have been ringfenced, are aptly liquid and remain unaffected by events in Greece.
George Syrichas, executive board member of the CBC, had informed deputies on July 2 that the supervisory authority asked the Greek subsidiaries to eliminate their exposure to risks related to Greece.
The subsidiaries of the four Greek banks operating in Cyprus are likely to change hands in the coming days as sweeping changes in the Greek banking sector are expected, the Cyprus Mail reported.
News reports have suggested that the four subsidiaries, that announced first quarter profits for their Cyprus operations, would be ideal takeover targets by the likes of Bank of Cyprus and Hellenic, both of which have EU or private capital available, but need to lower their ratio of non-performing loans, a problem that the Greek subsidiaries generally don’t face on the island.
Referring to “media speculation” about the acquisition of banking institutions in Cyprus, Hellenic Bank said it nothing to report.
“Were there to be a material development to report in this regard, we will communicate it in the appropriate manner as indicated by the supervisory authorities. Given broader developments in the region, any speculation risks unnecessary upheaval to the banking system, and the investors in general.”
Greek bank subsidiaries in Cyprus operate mainly in the corporate and wealth management sectors, enjoy a very low ratio of loans-to-deposits, maintain a level of NPLs on their loanbooks far lower than the Cyprus banking system’s 50% and have seen an influx of deposits, mainly coming from Greece, due to a sense of insecurity by businesses and individuals who fear a “bail in” of savings in Greece, similar to what happened in Cyprus in2013.
