Greek Bank Recapitalization Could Cost 14.4 Billion Euros

The euro zone may need to spend only 10 billion euros or less to help recapitalize Greek banks, a senior EU official said, after an ECB test showed the sector would need an extra 14.4 billion euros of capital if major risks materialized.

Euro zone creditors have earmarked up to 25 billion euros ($27 billion) within the latest, 86-billion-euro bailout, to recapitalize banks after people pulled their money out earlier this year fearing Greece might leave the euro zone.

“It looks like … out of the envelope of the 25 billion … the 10 billion which is sitting in the ESM (European Stability Mechanism) would suffice,” a senior EU official said.

“Given the results of the comprehensive assessment (of bank capital needs by the European Central Bank) I don’t think anybody will be obsessing about this … until the 15th of November, because as it turns out, the 10 billion will suffice for now.”

The release of the remaining 15 billion, now unlikely to be needed, is linked to the completion of a formal stage in the bailout called the first review, in which creditors assess which of the agreed reforms have been implemented.

Euro zone finance ministers will discuss progress in the implementation of Greek reforms next Monday.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza