Greek banks have asked for permission to access the remaining part of a €28 billion state support package first agreed in 2008, Finance Minister George Papaconstantinou said today.
Investors have hammered Greek bank stocks since last year, when the country spiraled into fiscal crisis and saw its borrowing costs spike after it revealed its budget deficit was more than double the previous estimate.
Since then, doubt over the banking sector's health has risen; last week Moody's Investor Service downgraded the debt ratings of Greece's five biggest banks, highlighting pressure on their loan portfolios from the country's recession.
About €17 billion, mainly state guarantees, remain in the scheme launched by the previous conservative government to help Greek banks deal with the global credit crisis.
The aid would come in the form of loan guarantees and Greek government bonds, which the banks could use as collateral for credit lines from the European Central Bank.
"The banks have asked to use the remaining funds of the support plan...They want to have additional safety, now that the economy and the banking system are under pressure," Papaconstantinou told reporters.
"We are discussing with the Bank of Greece a procedure to distribute the funds."
Greek bank shares fell further after the announcement to stand 3.4 per cent lower in the afternoon. They have lost 20 per cent so far this year, underperforming a 9 per cent drop by the general Athens stock index.
A banking source who wished not to be named said Greece's four largest banks - National Bank of Greece, Eurobank, Alpha Bank and Piraeus Bank - had made the request last week. A decision on the allocation could happen by the end of the week, the source said.
The banks have already made use of part of the plan's funding by issuing preferred shares to the state in exchange for capital injections. But the biggest part of the package, mainly state guarantees, was left unused.
Greek banks have repeatedly said they are not facing any liquidity problems, but some have found it harder to raise funds in money markets, making them more dependent on money market funding from the European Central Bank.
The ECB decided last month to extend easy collateral rules for money operations beyond the end of this year; this will help Greek banks by ensuring they can keep using Greek government debt to borrow even if Greece is downgraded further.
Reuters