Greece’s four largest banks need to boost their capital by 27.5 billion euros ($36.3 billion) after taking huge losses from the government-imposed debt swap earlier this year, the largest sovereign restructuring in history.
The National Bank of Greece, the country’s biggest lender, needs to raise 9.8 billion euros, ($12.95 billion) according to an e-mailed report from the bank. Eurobank needs 5.8 billion euros, ($7.66 billion,) Alpha Bank needs 4.6 billion euros ($6.16 billion) and Piraeus Bank needs 7.3 billion euros, ($9.65 billion) according to the report. Total recapitalization needs for the country’s banking sector amount to 40.5 billion euros, ($53.55 billion) the report said.
The 50 billion euros earmarked for Greek banks in the country’s bailout program “is appropriate to cover the recapitalization and restructuring costs of the Greek banking sector,” the central bank said. “It is expected to remain adequate under reasonable levels of economic uncertainty.”
The recapitalization was needed because a former government under the PASOK Socialists whacked investors with 74 percent losses, including Cypriot banks who had huge holdings in Greek bonds and were nearly bankrupted, requiring the island government to seek an international bailout to keep the economy from collapsing.
The banks have received bridge recapitalization loans from the Hellenic Financial Stability Fund (HFSF) to raise their core tier one capital ratios to 9 percent, as required under the terms of the country’s bailout from the European Union and International Monetary Fund. The recapitalization must be completed by the end of April, through a combination of common equity and contingent convertible bonds.