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Greek bank merger suspended

April 8, 2013

Greece's Eurobank has confirmed earlier media reports that its planned merger with the National Bank has been put on hold. The country's four main lenders are all supposed to recapitalize separately.

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A man leaves a Eurobank branch in central Athens REUTERS/John Kolesidis
Image: Reuters

EFG Eurobank of Greece on Monday reported its planned merger with the country's largest lender, the National Bank (NBG), had been suspended, paving the way for Greece's banks to decide on recapitalization mechanisms independently.

Eurobank said its directors would meet on Tuesday to decide on ways of raising its capital stock in line with international requirements.

The announcement sent the shares of EFG and NBG plummeting minutes after trading opened in Athens, with the two stocks losing about 30 percent of their value each as investors feared a looming nationalization of the lenders in question.

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Market domination feared

The National Bank and Eurobank had already been several months into a merger process that also foresaw a joint recapitalization. But officials from the European Union, the International Monetary Fund (IMF) and the European Central Bank (ECB) had reportedly expressed deep concern the planned new banking entity would dominate the Greek market in an unhealthy way.

"The creditors do not like the creation of such a major player with a market share of around 40 percent," Bank of Greece Governor George Provopoulus warned in a televised interview last week.

The troika of international lenders said the merger would have resulted in the new entity holding deposits to the tune of 170 billion euros ($221 billion), almost equaling the country's annual gross domestic product (GDP).

hg/mz (AFP, Reuters, AP)