By George Georgiopoulos
ATHENS Nov 16 Greece's international lenders
will enforce additional supervision on the country's troubled
banks along with the billions of euros they will provide to
shore them up, senior bankers said on Friday.
The so-called troika of the European Commission, European
Central Bank and International Monetary Fund lenders wants its
own monitors at each bank receiving state support to oversee
credit policies and restructuring plans.
"The supervision by monitoring trustees has been demanded by
the troika and the EU Competition Commission," one of the
bankers with direct knowledge of the matter told Reuters,
declining to be named.
"The trustees will not only be looking at new credit, they
will also have a say on how lenders are managing their entire
loan book and their follow-up on existing loans."
They will also oversee any lending to top management, board
members and staff, and their families, the banker said.
Of Greece's second 130 billion euro ($166 billion) bailout
package, 50 billion euros is earmarked to recapitalise the
country's battered banking sector, and international lenders
want better supervision to ensure banks follow best practice.
In 2012 Reuters has published several in-depth reports on
alleged mismanagement at Greek and Cypriot banks, including
Proton Bank, Piraeus Bank and Marfin Popular
Bank, now renamed Cyprus Popular Bank.
In May, Piraeus announced it was suing Reuters over a report
about the bank renting properties owned by companies run by its
chairman and his family. The bank is claiming 50 million euros
in damages. Reuters stands by the accuracy of its report.
On Monday, Athens unveiled a long-awaited framework to
recapitalise its banks, whose equity base was nearly wiped out
by huge losses from a sovereign debt swap and rising loan
writedowns in a deep recession.
Under the plan, banks will have to issue new shares to
achieve at least a 6 percent core Tier 1 capital adequacy ratio
plus bonds that can be converted into shares - so-called CoCos -
to boost it up to 9 percent.
The private sector will have to take up at least 10 percent
of the new shares to be issued to keep lenders privately run.
Failure will mean nationalisation.
The remainder will be taken up by a bank support fund, the
Hellenic Financial Stability Fund (HFSF), which is funded from
the country's bailout and has already injected 18.5 billion
euros into the country's four biggest banks.
The HFSF, which will provide most of the new capital by
buying most of the new shares and all of the convertible bonds,
will become the banks' biggest shareholder.
Greek bank shares fell sharply when the recapitalisation
framework was unveiled on Monday.
Concerns over the dilutive impact of the scheme on current
shareholders and an annual 7 percent coupon that banks will have
to pay annually on the CoCos pulled the banking index
down 15 percent.
"Adding an extra layer of supervision will mean less
flexibility for bank managements," said Euroxx Securities
analyst Maria Kanellopoulou.
"The troika does not want banks to be nationalised. But
given the large amounts that will be pumped into them, it wants
to have a say."
Bankers expressed reservations on the troika's demand for
tighter scrutiny, saying it might prove cumbersome for
commercial banking operations.
"This demand by the troika shows lack of trust. It will
place too much responsibility in the hands of monitoring
trustees who are not commercial bankers," said a senior banker
who declined to be named.
"Overseeing restructuring plans is logical, but when it
comes to credit policy it may make things a bit dysfunctional,
inefficient," the banker said. "But the troika thinks this is
necessary, and that's that."
The independent monitors will be picked from credible
auditing firms and will have to be approved by the European
Commission. They will report to the troika and have full access
to banks' books, the bankers said.
According to Kathimerini newspaper, the tighter supervision
also aims to cut the umbilical cord between banks and the
political system and big media organisations, some of which have
received loans that might not have been granted under strict
The paper said all loans would come under the microscope -
credit extended to banks' staff, shareholders and top
management, including their spouses, children and relatives.
In Greece's state-financed political system, big political
parties pledged future state funding as collateral to get bank
loans. The parties, with debt of more than 200 million euros,
now face much lower income to service their loans, as falling
popular support in recent elections means they will get less
from the state, which bases its funding on the proportion of