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Piraeus Bank Takes Over Ailing ATEbank

Greece has given up on money-losing ATEbank, which will be taken over by the privately-operated Piraeus Bank

ATHENS – The Greek government has agreed to hand over the performing loans and healthy assets of nearly-insolvent state-run ATEbank to the privately-run Piraeus Bank to keep it from closing, but the toxic assets will be given to the Hellenic Financial Stability Fund (HFSF,) while some units will be taken over by the state, the central bank said. That effectively means that bad loans will be dumped on the state and taxpayers.
The government was under pressure from international lenders to restructure the money-bleeding ATEbank, which has been in operation in 1929 after starting as an agricultural bank but which would have needed a 5 billion euros, or $6.15 billion capital injection to stay alive. Piraeus Bank, like other private Greek banks, needed a recapitalization itself earlier this year after a previous government imposed 74 percent losses on private investors and banks holding Greek bonds, wiping out billions of euros and dollars of their assets.
Under the arrangement, Piraeus Bank gets ATEbank’s performing loans and securities as well as its deposits. The government has a 90 percent stake in ATEbank, which was bleeding government coffers. A senior banking official close to the deal told Reuters that no money changed hands in the transaction. “There was no other offer,” the official said. “The transaction puts a stop to losses for the state.”
Piraeus, which had confirmed its interest in ATEbank earlier this month, said ATEbank would retain its brand within the group. Greece’s central bank said the deal was agreed after sounding out local and foreign banks. The official said Piraeus was left as the only suitor after others pulled out. Piraeus bank officials had pledged not to fire any ATEbank workers.
ATEbank failed a European stress test last year and had not published its 2011 results while it awaited a final decision on its future. Starting on July 30, ATEbanks’ branch network will become part of Piraeus. The combined entity will have 75 billion euros ($92.35 billion) of assets, 35 billion euros ($43 billion) of customer deposits and 47 billion euros ($57.8 billion) of loans.
Officials from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) were in Athens inspecting the country’s books and talking to Prime Minister Antonis Samaras to push him to impose more reforms, such as the move to get rid of the money-losing bank which was being propped up by government funding. Coalition of the Radical Left (SYRIZA) leader Alexis Tsipras charged that the bank was being used to hide bad loans given to preferential customers and politicians.
(Sources: Reuters, Bloomberg)

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