UPDATE 1-Greece to extend bank recapitalisation deadline-central bank chief

Mon Apr 1, 2013 6:34pm EDT

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ATHENS, April 1 (Reuters) - Greece will extend a deadline for the recapitalisation of its banks by a few weeks, possibly until the end of May, Greek central bank chief George Provopoulos said on Monday.

Greek banks, which are being recapitalised with funds from the country's latest EU/IMF bailout, have been lobbying for the terms of the recapitalisation scheme to be sweetened and also sought an extension to an end-April deadline for the plan.

"There will be a small extension of a few weeks, it may be pushed to the end of May," Provopoulos told state TV.

The scheme aims to restore the solvency of the country's top four lenders, National Bank, Alpha bank, Piraeus bank and Eurobank.

Provopoulos confirmed that Greece's foreign lenders were concerned about National Bank's takeover of Eurobank .

Bankers told Reuters on Saturday that the lenders had raised issues concerning the size of the merged entity relative to Greece's gross domestic product (GDP) and the banking sector as a whole.

The combined NBG-Eurobank group would have assets of 170 billion euros, almost the size of Greece's 190 billion GDP and 36 percent of total deposits in the country's banks.

"They don't like the idea that such a big lender will be created," Provopoulos said. "There is concern that if private shareholders are not found, it will go under state control."

However, asked if the merger should be undone, he replied: "No, it shouldn't."

Officials from the European Union, the European Central Bank and the International Monetary Fund are due in Athens this week to resume an inspection visit and talks on key issues, including the bank recapilisation and public-sector layoffs.

Provopoulos reiterated that the Greek economy, which is in its sixth year of recession, is expected to shrink 4.5 percent this year - at the higher end of the targeted range - as the Cypriot crisis was expected to lower GDP by 0.35 percentage points.

A European Union rescue package to save Cyprus from bankruptcy imposed a hefty levy on deposits over 100,000 euros in Cypriot banks, an unprecedented move that sent jitters across the single currency euro zone.

Provopoulos said deposits in Greece were guaranteed. He added that Greek banks saw deposit inflows in March in spite of the crisis in Cyprus, and that more than 19 billion euros had returned to Greece since mid-June.

"Even in March, which was a turbulent month due to the developments in Cyprus, we had (deposit) inflows," he said. (Reporting by Renee Maltezou and Harry Papachristou; Editing by Deepa Babington and David Brunnstrom)

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