ECB endorses Greek bank recap terms

The European Central Bank said on Wednesday it was satisfied with a plan to recapitalise Greek banks, a key part of the debt-laden country’s international bailout.

Athens unveiled earlier this month long-awaited details of the bailout-funded 50 billion euro scheme to replenish the capital of its ailing lenders. Greek banks’ capital was nearly wiped out by huge losses incurred under a sovereign debt swap and as a result of rising loan impairments.

Under the terms of the plan, viable Greek lenders will issue shares and convertible bonds. If private investors fail to buy at least a tenth of the new stock, the lenders will fall under the control of the HFSF, a bailout-financed fund which will buy most of the new shares and all of the convertible bonds.

A senior Greek banker criticised the plan last week, saying it did not offer strong incentives for private investors to take part.

But the ECB said on Wednesday the scheme was adequate.

“The ECB welcomes the draft law,” it said in an opinion. “The ECB considers that the proposed pricing framework contains appropriate incentives to encourage Greek credit institutions to exit state support as soon as possible.”

The banks’ new shares are to be priced at a 50 percent discount to the average price 50 days prior to the offering.

The plan is to apply to the country’s four biggest lenders, National Bank of Greece, Alpha Bank, Eurobank and Piraeus Bank.