Exclusive: Greek bank bailout funds depend on business plan, stress test - sources

[August 12, 2015]  By Balazs Koranyi and Tom Körkemeier

FRANKFURT/BRUSSELS (Reuters) - Initial bailout funds for Greek banks will be placed in a special account not on their balance sheets and lenders will receive fresh equity only after a "stress test" is finished by the end of October, several sources told Reuters on Wednesday.

An initial 10 billion euros will be made available "immediately" to shore up confidence in the Greek banks, several sources said, while authorities conduct a detailed asset quality review, that is expected to take several months.

Greek banks will also have to submit viable business plans to European authorities before fresh equity is disbursed and will only receive cash from the special account, which will be controlled by the European Stability Mechanism, once resolution authorities sign off on the plans, the sources, who asked not to be named, said.

Another 15 billion euros will be available before the end of the year, the sources said.

"When the full recapitalization of banks is fulfilled it will have a major impact for the economy," one of the sources said. "We know that there is around 40 billion euros in cash under the mattresses in the real economy and that money could come (back to the banks) very very quickly."

Greek banks, closed for much of July, have been kept on a lifeline by the European Central Bank and limit cash withdrawals to 420 euros per week to prevent a run by clients.

Greece agreed this week on the its third bailout deal, potentially worth up to 86 billion euros, and expects to have all approvals in place by Aug 20, when a 3.2 billion euro payment to the ECB is due.

European authorities have given up on the idea of bailing in either depositors or other creditors but shareholders will be diluted, the sources added.

Once the banks' plans are approved, new shares in the banks will be held by the Hellenic Financial Stability Fund (HFSF), not European authorities, which will allow the banks to perform normal credit and capital market operations with relatively few limitations, one of the sources said.

Greece's top banks include National Bank of Greece, Eurobank, Alpha Bank and Piraeus Bank.

(Reporting by Balazs Koranyi; editing by Alexander Smith)
 

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