(Updates with EU approval of Piraeus Bank restructuring in final paragraph)
ATHENS, July 23 National Bank of Greece (NBG) will proceed with a restructuring which includes reducing its stake in Turkey's Finansbank, after the European Commission approved the plan on Wednesday.
NBG was one of Greece's big four banks that were rescued with state aid during the country's debt crisis. The European Commission then reviewed NBG's business plan to see if it was in line with EU state aid rules.
"The measures already implemented and those envisaged in the future will enable the bank to fully restore its long-term viability, while limiting the distortions of competition brought about by the state aid granted," the Commission said on Wednesday.
NBG, majority owned by Greece's bank rescue fund HFSF which was funded with 50 billion euros from the country's bailout, has begun to implement salary cuts, branch closures and other cost-cutting moves, including an early retirement plan.
The restructuring plan also envisages NBG cutting its holding in its Turkish subsidiary Finansbank to strengthen its capital position. NBG has almost full control of Finansbank and will keep a majority stake.
Finansbank has been a steady cash cow for NBG. The Greek bank's first quarter profits were higher than expected, helped in part by Finansbank, which contributed 63 million euros or 35 percent of the group's net earnings.
The Commission also said that a relatively limited downsizing of NBG would be enough to limit any distortions to competition and did not ask the group to shrink its Greek banking activities.
It said NBG shareholders and subordinated debt holders had contributed significantly to reducing the amount of state capital aid that was injected, having taken part in capital raising by the bank.
"The injected state aid did not bail out historical shareholders who have been almost completely diluted," the Commission said.
The Commission also approved on Wednesday the restructuring plan of Piraeus Bank, the country's second-biggest lender by assets after NBG, Piraeus said in a statement. (Reporting by George Georgiopoulos; Editing by Jane Merriman and Elaine Hardcastle)