Brussels, 23/07/2014 (Agence Europe) - On 23 July, the European Commission gave the go-ahead to restructuring plans for National Bank of Greece (NBG) and Piraeus Bank.
EU Competition Commissioner Joaquin Almunia said: “Through the restructuring plan, NBG will focus its activities on the strong Greek and Turkish banking operations and improve their efficiency. This will ensure that the bank can continue financing the Greek economy on a sustainable basis”. NBG has already started to implement significant rationalisation measures such as a voluntary staff retirement scheme, salary cuts, branch closures and further cost cutting initiatives in Greece and South Eastern Europe. The restructuring plan continues this effort. It provides for a further restructuring of international operations and Greek non-core activities and a reinforcement of Greek banking operations, mainly through a rationalisation of operating expenses, a reinforcement of the net interest income and prudent risk management. NBG will decrease its shareholding in its Turkish subsidiary Finansbank, which will strengthen the capital position of NBG, but will retain a majority shareholding.
The restructuring plan for Piraeus includes a slashing of operating expenses, a boosting of net interest products, prudent risk management and a significant downsizing of Piraeus' loss-making international operations.
Since 2008, Greece has provided capital and liquidity aid to NBG and Piraeus on a number of occasions. In its assessment, the Commission acknowledged that most of Piraeus' and NBG's difficulties do not come from excessive risk-taking, but from the sovereign debt crisis and the exceptionally protracted and deep recession which started in Greece in 2008.
The state aid will therefore create far fewer distortions and will be far less subject to moral hazard, given the circumstances, than aid to banks that had taken too many risks. The Commission concluded that the two restructuring plans complied with the EU rules on the restructuring of banks in the financial crisis. Piraeus has received more aid than other big banks, but reduced the amount of aid needed through capital enhancing acquisitions, buy-backs of subordinated debt at significant discounts to par, and capital increases. Indeed, Piraeus regained access to capital markets and raised significant amounts of private money in 2013 and 2014, which allowed it to repay part of the aid received. (EL)