25 September 2012
Foreign banks are paying up to get out of Greece. France's Credit Agricole and Société Générale and Portugal's Millennium BCP are all looking to offload their Hellenic subsidiaries to Greek rivals. But the return ticket won't be cheap.
The Hellenic Financial Stability Fund, a euro zone-monitored entity that holds Greece's stakes in its recently-recapitalised banks, is reluctant to wave the foreigners off at the airport without safeguards. It has ordered the three sellers to provide capital against future losses, in order to allow the freestanding subsidiaries - Emporiki, Geniki and Millennium, respectively - to fend for themselves. That means a core Tier 1 ratio of at least 7 percent, and the obligation to retain liquidity lines for a specified time, according to a senior Greek banker.
The sums are sizeable. Emporiki's 22 billion euro loan book means Credit Agricole will have to send 3 billion euros of capital to Athens, according to the Greek banker. Millennium BCP has already provisioned 450 million euros, and SocGen will have to set aside a similar amount.
Banks have tangible reasons to obey the HFSF. Credit Agricole and Millennium BCP have both funded their Greek units from their parent companies, instead of matching loan assets with local deposits. For Credit Agricole, this gap now amounts to some 1.6 billion euros. If it just left without paying the Grexit charge, the money might never be paid back.
Yet this isn't the whole picture. Given that it has already matched Geniki's assets and liabilities, SocGen could have just walked away. The reason it hasn't could be that its reputation with the rattled providers of the group's liquidity would have suffered if it had appeared to be running away from Greece in a panic. But it could also be that the European Central Bank, which helps oversee the HFSF and may soon supervise all big European banks, has balked at footing the bill for further potential losses.
All of which leaves the foreigners nursing painful Grexit wounds. Yet they won't envy the Greek banks who are acquiring their assets for peanuts. Freedom now could still end up looking better than staying behind, and suffering further losses from the ever-worsening Greek economy.
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© Breakingviews 2012
Foreign banks are paying up to get out of Greece. France's Credit Agricole and Société Générale and Portugal's Millennium BCP are all looking to offload their Hellenic subsidiaries to Greek rivals. But the return ticket won't be cheap.
The Hellenic Financial Stability Fund, a euro zone-monitored entity that holds Greece's stakes in its recently-recapitalised banks, is reluctant to wave the foreigners off at the airport without safeguards. It has ordered the three sellers to provide capital against future losses, in order to allow the freestanding subsidiaries - Emporiki, Geniki and Millennium, respectively - to fend for themselves. That means a core Tier 1 ratio of at least 7 percent, and the obligation to retain liquidity lines for a specified time, according to a senior Greek banker.
The sums are sizeable. Emporiki's 22 billion euro loan book means Credit Agricole will have to send 3 billion euros of capital to Athens, according to the Greek banker. Millennium BCP has already provisioned 450 million euros, and SocGen will have to set aside a similar amount.
Banks have tangible reasons to obey the HFSF. Credit Agricole and Millennium BCP have both funded their Greek units from their parent companies, instead of matching loan assets with local deposits. For Credit Agricole, this gap now amounts to some 1.6 billion euros. If it just left without paying the Grexit charge, the money might never be paid back.
Yet this isn't the whole picture. Given that it has already matched Geniki's assets and liabilities, SocGen could have just walked away. The reason it hasn't could be that its reputation with the rattled providers of the group's liquidity would have suffered if it had appeared to be running away from Greece in a panic. But it could also be that the European Central Bank, which helps oversee the HFSF and may soon supervise all big European banks, has balked at footing the bill for further potential losses.
All of which leaves the foreigners nursing painful Grexit wounds. Yet they won't envy the Greek banks who are acquiring their assets for peanuts. Freedom now could still end up looking better than staying behind, and suffering further losses from the ever-worsening Greek economy.
Agenda-setting financial insight. Subscribe to the full Breakingviews service.
© Breakingviews 2012
