Greece’s four largest banks agreed to take up a €50m convertible bond to help recapitalise Proton Bank, a small lender, the central bank announced this weekend, in what is being seen as an attempt to avert a run on the country’s fragile banking system
The deal came ahead of an expected announcement this week that several Athens lenders plan to seek emergency liquidity assistance from the Greek central bank, senior bankers said
Greek banks no longer have sufficient high-quality collateral to seek funding from the European Central Bank after recent sovereign downgrades. But they are eligible for liquidity allocated by the Bank of Greece in agreement with the Frankfurt-based ECB and are expected to seek it this week.
All four big lenders – National Bank of Greece, Alpha Bank, EFG Eurobank and Piraeus Bank – face a looming liquidity crunch as about €10bn of government deposits are set to be withdrawn from local banks to pay off debt maturing in the next few weeks.
In this environment, it was essential to prevent Proton from collapsing and creating a mood of fear with unpredictable consequences,” said one banker, explaining the rationale for the take-up of the Proton bond
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