ATHENS – The National Bank of Greece has moved to take over Proton Bank, a small lender that is under investigation for possible violation of the country’s money-laundering laws and embezzlement. NBG said it had it activated a bank rescue fund to save Proton, the first bank to be taken over under the Financial Stability Fund (FSF,) a safety net set up by Greece and its international lenders for banks that need to recapitalize but cannot raise funds in the market.
Analysts said the move had to do with Proton’s own business problems and not with the country’s severe debt crisis, Reuters reported. “After recommendations by the Bank of Greece, the Finance Ministry proceeded to apply to Proton Bank a new law about the restoration of banks,” the Bank of Greece said in a statement.
The Bank of Greece said Proton was split into a “good bank” where all of its private sector, government deposits and sound assets were transferred. The new bank will have the FSF backstop as its sole shareholder and retain the trade name Proton. “The ‘good bank’ is well capitalized, with a capital adequacy ratio that is well above the regulatory threshold. It has access to euro-system liquidity through the Bank of Greece,” the central bank said.
The central bank said the license of the old Proton Bank was withdrawn and it was put into liquidation. The proceeds of the liquidation will be used to cover the claims of third parties. Proton shareholders will rank as last claimants. “The new bank, free of the deficiencies of the previous bank, is financially sound and will continue normally its operations,” the Bank of Greece said.
Proton’s troubles began in the summer after it disclosed it was being probed by the central bank on money laundering violations related to transactions by its main shareholder. The authorities did not disclose the cost of Proton’s rescue, but the small leftist Syriza party claimed it was over $1.17 billion. A government spokesman insisted other Greek banks had adequate funds and that Proton was a “special” case. “There is no intention at this stage to nationalise Greek banks, beyond the special problem of Proton Bank,” government spokesman Elias Mossialos told reporters.
Proton Bank also received state support in July — one day ahead of EU-wide bank stress tests — with the finance ministry saying the move was dictated by “state interests” owing to fears of “negative effects” on the Greek banking system. At the time, Greek media reported that a special prosecutor was investigating a 51-million-euro withdrawal at Proton Bank which Bank of Greece sources had described as “unusual.” NBG replaced the board of directors.
Proton Bank, where the 2007-10 US ambassador to Greece Daniel Speckhard was a non-executive chairman, has pledged to cooperate with the authorities while one of its key shareholders, 39-year-old businessman Lavrentis , has denied any wrongdoing. The probe had determined that the money was loaned to Greek-based pharmaceutical group Alapis — where Lavrentiadis, Alapis’ founder, was until recently a main shareholder, reports said, according to AFP.
Greek banks have suffered as a result of debt-hit Greece’s pariah status among creditors and have had to rely on the European Central Bank for fresh financing to keep them afloat.Proton Bank has received nearly $410 million in state rescue funds and guarantees since 2008, Finance Minister Evangelos Venizelos said in August.
“The activation of the Financial Stability Fund for Proton Bank has nothing to do with its exposure to Greek sovereign bonds but it has to do with its bad loans’ portfolio,”a Greek-based bank analyst who declined to be named told Reuters. Proton, with a network of 31 branches and a current market value of about $15 million, had total assets of $5.18 billion at the end of the first quarter.
A half dozen Greek banks have failed the European Union’s so-called stress tests and Greece’s FSF has $13.6 billion to recapitalize the banking system. That amount should grow to 30 billion once eurozone parliaments ratify the EU’s EFSF safety net created to prevent the Greek crisis from spilling over into other countries like Spain or Italy and triggering a new global economic downturn.
(Sources: Kathimerini, Reuters, AFP, BBC)