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March 25, 2023

Greece suspends bank merger

Greece has suspended the merger of the country’s two largest lenders, National Bank of Greece SA (NBG) and Eurobank SA (EUROB.AT), following objections from a troika of international lenders who feared that the combined entity could become too big and pose a systemic risk to the country, foxbusiness.com reports. However, as an end-April deadline for Greece’s much delayed bank recapitalization program—already more than a year behind schedule—approached, it looked increasingly unlikely that NBG and Eurobank, which have a combined capital requirement of EUR 15.6 bln, would be able to raise the money they needed. And although the merger may yet proceed, the decision will now be made by the bank rescue fund, the finance ministry official said after meetings with the troika delegation. “The Bank of Greece informed us that the two lenders are not likely to be able to raise 10 per cent they need from the private market,” the official said. “As a result, the financial stability fund has begun the recapitalization process for the two banks and becomes their major shareholder.”

Earlier Sunday, the country’s central bank re-affirmed that the Greek banks would have to complete their recapitalization by the end of this month—dashing the hopes of NBG and Eurobank management for an extension until after the merger was formally done. “The Bank of Greece confirms that the recapitalization for the four systemic banks—National Bank of Greece, Alpha Bank, Eurobank, Piraeus Bank—is progressing normally and in any case will be completed before the end of April,” the central bank said in a statement. Although European officials say that no explicit veto has been exercised against the deal, the troika had raised objections to the NBG-Eurobank tie-up in recent weeks. Also, shares in National Bank of Greece and Eurobank Ergasias collapse 30% in Athens following news that the government has blocked a merger between the two lenders after they were unable to raise enough capital and amid fears that the new entity would be too large to be rescued if required, according to  seekingalpha.com. The banks are now heading for state control.

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