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Greece’s Banks Recapitalization to be Completed By April 2013

Recapitalization of Greece’s banks will need to be completed by end of April 2013.  According to TA NEA newspaper, Finance Minister Yiannis Stournaras and Deputy Finance Minister Christos Staikouras discussed with the Troika on Sunday evening the terms and the time-table for the recapitalization of the viable Greek banks.

It was decided that the process of recapitalization of viable banks should be completed by the end of April 2013 so that the capital adequacy ratios (Core Tier 1) of the banks to be increased by 9%.

In this context, the Bank of Greece will publish by the end of December 2012 a detailed report on the capital needs of  each bank stating the process of recapitalization. By the end of December 2012, the Financial Stability Fund (ESM) will provide the loan-bridge, sufficient funds to increase by 9% Tier I capital of banks.

This means that Greek banks will be almost fully capitalized by the end of the year.

Still, by the end of January 2013, banks will have completed the issuance of convertible bonds (CoCos.), which will be covered entirely by the ESM. To keep the private nature of the banks, private shareholders will have to cover at least 10% of the share capital increase.

The ratio is likely 80% of common shares – 20% CoCos. In such case, the capital increases through common shares will fall significantly limiting the participation of individuals. (TA NEA)

In order to recapitalize the banks with 24 billion euro 1) Troika and Greek government must agree on the full 13.5 billion euro austerity package 2) The Troika must issue a positive report on Greece 3) the bailout tranche of 31.5 billion euro must be released.

The banks recapitalization is been considered as the A&O for the market as the banks give loans – if they give any – only with very high guaranties. For a business loan of 10,000 euro a friend was asked to have her home of 80 sq m as collateral.

If you consider that the rest 7 billion euro will be used by the state to pay outstanding debts to its suppliers, Greeks will see zero-euro from the bailout. But they are honoured to repay the loans, IMF & Co generously give to Greece with interest rates of some 7 percent.

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