The Weekend Economists travel the Yellow Brick Road, November 14-15.

[Demeter]

23. Greek Banks Ask Investors to Take Uncertain Leap of Faith

http://www.bloomberg.com/news/articles/2015-11-13/greek-banks-ask-investors-to-take-leap-of-faith-amid-uncertainty

Greek bank investors are being asked to inject new funds into the lenders for the second time in less than 20 months, even as doubt remains that the country will receive the next round of bailout funds.

The National Bank of Greece SA and Eurobank Ergasias SA joined Piraeus Bank SA and Alpha Bank AE on Thursday in starting book-building processes as they seek to fill part of 14.4 billion-euro ($15.5 billion) hole in their accounts identified by the European Central Bank. The state-owned Hellenic Financial Stability Fund will contribute the rest from loans from Greece’s latest bailout, but not before imposing mandatory losses or "burden sharing” on shareholders and creditors of the banks.

“The recapitalization of Greek banks, perhaps the most critical problem for the Greek state today, has entered its most critical stage,” Emilios Avgouleas, professor of international banking law and finance at the University of Edinburgh, and Levy Institute President Dimitri B. Papadimitriou, said in a report on Thursday. “Instead of repeating the mistakes of the past, recapitalization should create an environment of hope amidst renewed efforts to repair the Greek economy.”

The fundraising comes as uncertainty hangs over the Greece’s own access to funds. A disbursement of as much as 10 billion euros from the European Stability Mechanism to the HFSF, which will backstop private capital injections with state funds, will only take place if the government reaches an agreement with creditors over a set of milestones detailed in the country’s bailout agreement.